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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF
1934 For the fiscal year ended
October 31, 1999
Commission File Number 1-8100
EATON VANCE CORP.
(Exact name of registrant as specified in its charter)
Maryland 04-2718215
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
255 State Street, Boston, Massachusetts 02109
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(Address of principal executive offices) (Zip Code)
(617) 482-8260
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Non-Voting Common Stock ($0.015625 par value) New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
Non-Voting Common Stock par value $0.015625 per share
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Title of Class
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Aggregate market value of Non-Voting Common Stock held by non-affiliates of the
Registrant, based on the closing price of $38.00 on December 31, 1999 on the New
York Stock Exchange was $1,023,895,978. Calculation of holdings by
non-affiliates is based upon the assumption, for these purposes only, that
executive officers, directors, and persons holding 5% or more of the
registrant's Non-Voting Common Stock are affiliates.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the close of the latest practicable date.
Class Outstanding at December 31, 1999
Non-Voting Common Stock,
$0.015625 par value 35,411,631
Common Stock, $0.015625 par value 77,440
Portions of registrant's Annual Report to Stockholders for the fiscal year ended
October 31, 1999 (Exhibit 13.1 hereto) have been incorporated by reference into
the following Parts of this report: Part I, Part II and Part IV.
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1
PART I
ITEM 1. BUSINESS
The Company's principal business is creating, marketing and managing mutual
funds and providing investment management and counseling services to
institutions and individuals. The Company has been in the investment management
business for over seventy-five years, tracing its history to two Boston-based
investment managers: Eaton & Howard, formed in 1924, and Vance, Sanders &
Company, organized in 1934. As of October 31, 1999, the Company managed $40.9
billion in portfolios with investment objectives ranging from high current
income to maximum capital gain.
GENERAL DEVELOPMENT OF BUSINESS
The Company's growth has resulted from its ability to develop, offer
successfully and manage effectively new funds and to increase the assets of
existing Eaton Vance Funds ("Funds"). The Company's strategy is to develop and
manage products with clearly understood and clearly presented investment
characteristics coupled with distribution arrangements that are attractive to
third-party distributors of the Funds.
The Company conducts its investment management and counseling business through
two wholly-owned subsidiaries, Eaton Vance Management ("EVM") and Boston
Management and Research ("BMR"), each of which is a Massachusetts business trust
registered with the Securities and Exchange Commission (the "SEC") as an
investment adviser under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"). Eaton Vance Distributors, Inc. ("EVD"), a wholly owned
broker/dealer registered under the Securities Exchange Act of 1934 (the
"Exchange Act"), markets and sells the Funds.
As of October 31, 1999, the Company provided investment advisory or
administration services to over 70 Funds and to over 800 separately managed
individual and institutional accounts. At that date, the Funds had aggregate net
assets of $38.1 billion and the Company's separately managed accounts had
aggregate net assets of $2.8 billion. The following table shows net assets in
the Funds and the separately managed accounts for the dates indicated:
FUND AND SEPARATELY MANAGED ACCOUNT ASSETS
AT OCTOBER 31,
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1999 1998 1997 1996 1995
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(in millions)
Funds:
Money Market $ 200 $ 200 $ 200 $ 200 $ 200
Equities 18,000 9,800 5,200 3,100 2,400
Bank Loans 10,000 6,200 3,900 2,800 1,400
Taxable Fixed Income 2,500 2,200 2,100 1,300 1,300
Non-Taxable Fixed Income 7,400 7,500 7,500 8,200 8,900
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Total 38,100 25,900 18,900 15,600 14,200
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Separately Managed Accounts 2,800 2,500 2,400 1,700 1,800
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Total $40,900 $28,400 $21,300 $17,300 $16,000
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2
ITEM 1. BUSINESS (CONTINUED)
On October 31, 1999, equity fund assets increased to 44 percent of total assets
under management from 34 percent on October 31, 1998, while taxable and
non-taxable fixed-income fund assets decreased to 24 percent of total assets
under management from 34 percent a year ago. Bank loan fund assets increased to
24 percent of total assets under management on October 31, 1999 from 22 percent
a year ago.
In 1995, the Company increased its ownership interest in Lloyd George Management
(BVI) Limited ("LGM"), an independent investment management company based in
Hong Kong. The two firms became affiliated in 1992 with the introduction of the
Eaton Vance Greater China Funds, which are advised by LGM from its headquarters
in Hong Kong. The investment management capabilities of LGM, with offices in
Hong Kong, London and Mumbai, India coupled with the introduction of the Eaton
Vance Medallion family of offshore funds, allow Eaton Vance to both manage and
distribute mutual funds globally.
In 1996, the directors of the Medical Research Investment Fund, Inc. engaged EVM
as administrator and EVD as distributor. The fund changed its name to EV
Traditional Worldwide Health Sciences Fund and became a member of the Eaton
Vance Family of Funds. The Fund, which concentrates investments in equity
securities of domestic and foreign companies engaged in research and the health
care industry, is managed by OrbiMed Advisors Inc. ("OrbiMed") (formerly named
Mehta and Isaly Asset Management), the Fund's advisor since inception. In 1998,
the fund converted to a multiple class structure and changed its name to Eaton
Vance Worldwide Health Sciences Fund.
In 1997, the Company focused on developing products that are managed to maximize
after-tax returns and on broadening its existing tax-efficient equity product
line. In May and June of 1997, the Company introduced Belvedere Equity Fund LLC,
a private fund for investors seeking to diversify concentrated positions in
common stocks with substantial market appreciation. In September 1997, the
Company introduced Eaton Vance Tax-Managed Emerging Growth Fund, a companion
product to Eaton Vance Tax-Managed Growth Fund which was introduced in the
spring of 1996.
In 1998, the Company continued developing products that are managed to maximize
after-tax returns by broadening its existing tax-efficient equity product line
while maintaining a balanced asset mix with fixed income and bank loan funds.
The Company launched Eaton Vance Tax-Managed International Growth Fund, a tax
efficient equity fund, in April 1998. In 1998, the Company introduced Belair
Capital Fund LLC, a privately placed fund for high net worth investors. In
October 1998, the Company completed a successful offering of Eaton Vance Senior
Income Trust, a New York Stock Exchange-listed, closed-end fund, investing
primarily in bank loans. This Fund provides investors with liquidity through
exchange listed trading and enhanced yields through the use of leverage.
The Company continued to expand its bank loan product-line in 1999 with the
introduction of two institutional senior loan funds, making bank loan funds
available through a broader group of financial intermediaries. In addition, the
Company raised $4.7 billion (including leverage) in equity private placements
for high net worth investors and $1.1 billion (including leverage) in 9
exchange-listed municipal bond fund public offerings. In an effort to expand its
overseas fund business, the Company organized four new funds in Dublin, Ireland,
for distribution in Europe and registered two additional funds in Hong Kong for
sale in Hong Kong.
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3
ITEM 1. BUSINESS (CONTINUED)
INVESTMENT MANAGEMENT AND ADMINISTRATIVE ACTIVITIES
Portfolio managers employed by the Company make investment decisions for all but
six of the Eaton Vance Funds in accordance with each Fund's investment
objectives and policies. Investment decisions for five international equity
Funds are made by Lloyd George Management, an independent investment management
company based in Hong Kong in which the Company owns a minority equity position.
OrbiMed Advisors, Inc., an independent investment management company based in
New York, makes investment decisions for Eaton Vance Worldwide Health Sciences
Fund. The Company's portfolio management staff have, on average, more than 20
years of experience in the securities industry. The Company's investment
advisory agreements for management services with each of the Funds provide for
fees ranging from 10 basis points of average net assets annually to 85 basis
points of average net assets annually. The trustees of the respective Funds, a
majority of the independent trustees, i.e., those unaffiliated with the
management company must approve the investment advisory agreements annually.
Fund shareholders must approve any amendments to the investment advisory
agreements. The fund generally may terminate these agreements upon 30 to 60 days
notice without penalty.
Investment counselors employed by the Company make decisions for the separately
managed accounts. The Company's investment counselors use the same sources of
information as Fund portfolio managers, but tailor investment decisions to the
needs of individual clients. The Company's investment advisory fee agreements
for the separately managed accounts provide for fees ranging from 20 to 80 basis
points of average net assets on an annual basis. These agreements are generally
terminable upon 30 to 60 days notice without penalty.
The following table shows investment advisory and administration fees received
for the past five years ended October 31, 1999:
INVESTMENT ADVISORY AND
ADMINISTRATION FEES*
YEAR ENDED OCTOBER 31,
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1999 1998 1997 1996 1995
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(in thousands)
Investment Advisory
Fees - Funds $174,027 $127,234 $ 95,531 $81,473 $69,094
Separately Managed Accounts 11,169 11,295 9,503 8,865 8,712
Administration Fees - Funds 12,181 12,662 12,071 7,793 4,631
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Total $197,377 $151,191 $117,105 $98,131 $82,437
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* Excludes gold mining investment management fees and administration
fees received from funds other than Eaton Vance Funds. The Company
did not receive any management and administration fees from gold
mining investments in 1999 or 1998.
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4
ITEM 1. BUSINESS (CONTINUED)
INVESTMENT ADVISORY AGREEMENTS AND DISTRIBUTION PLANS
In 1993, the Company introduced the Master/Feeder structure for most of its
Funds. Master/Feeder is a two-tiered arrangement in which Funds ("Feeder Funds")
with substantially identical investment objectives pool their assets by
investing in a common portfolio ("Master Fund"). Eaton Vance used Master/Feeder
to introduce four distinct mutual fund families, with each family having its own
prospectus, sales literature, product design and distribution structure (see
Marketing and Distribution of Fund Shares below). The structure was intended to
benefit fund shareholders through lower operating costs, while allowing the
Company to offer cost-effective distribution alternatives to the investment
professionals and their clients. In 1997, under revised SEC guidelines, the
Company began to modify the Master/Feeder structure to reduce the number of
Feeder Funds by merging some Feeder Funds into a single Fund with multiple
classes. This modification has reduced operating costs by reducing prospectus
and sales literature requirements, while continuing to offer a variety of
distribution alternatives to investors and maintaining the ability to attract
unaffiliated Feeder Funds.
Each Eaton Vance Master Fund (except funds managed by LGM or OrbiMed) has
entered into an investment advisory agreement with either EVM or BMR. Although
the specific terms of each such agreement vary, the basic terms of the
agreements are similar. Pursuant to the agreements, either EVM or BMR, as
applicable, provides overall management services to each of the Master Funds,
subject to the supervision of each Fund's Board of Trustees in accordance with
each Fund's fundamental investment objectives and policies. The investment
advisory agreements are approved by Fund shareholders and their continuance must
be approved annually by the trustees of the respective Funds, including a
majority of the independent trustees. Fund shareholders must approve any
material amendments to the investment advisory agreements.
EVM also serves as administrator or manager under an Administration Service
Agreement or Management Contract (each an "Agreement") to most Funds (including
those managed by LGM and OrbiMed). Under such Agreements EVM is responsible for
managing the business affairs of these Funds, subject to the supervision of each
Fund's Board of Trustees. EVM's services include recordkeeping, preparing and
filing documents required to comply with federal and state securities laws,
supervising the activities of the Funds' custodian and transfer agent, providing
assistance in connection with the Funds' shareholder meetings, and other
administrative services, including furnishing office space and office
facilities, equipment and personnel which may be necessary for managing and
administering the business affairs of the Funds. EVM (or an affiliate) provides
investment management or advisory services to most of these Funds. For the
services provided under the Agreements, each Fund is required, in some cases, to
pay EVM a monthly fee calculated at an annual rate not to exceed 0.35% of
average daily net assets. Each Agreement remains in full force and effect
indefinitely, but only to the extent that the continuance of such Agreement is
specifically approved at least annually by the Fund's Board of Trustees.
In addition, certain Funds have adopted distribution plans which, subject to
applicable law, provide for the reimbursement to the Company for the payment of
applicable sales commissions to the retail distribution firms through the
payment of an ongoing distribution fee (i.e., a Rule 12b-1 fee). These
distribution plans are implemented through distribution agreements between EVD
and the Funds. Although the specific terms of each such agreement vary, the
basic terms of the agreements are similar. Pursuant to the agreements, EVD acts
as underwriter for the Fund and distributes shares of the Fund through
unaffiliated dealers. Each distribution plan and agreement is initially approved
and its subsequent continuance must be approved annually by the trustees of the
respective Funds, including a majority of the independent trustees.
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5
ITEM 1. BUSINESS (CONTINUED)
Each Fund bears all expenses associated with its operation and the issuance and
redemption or repurchase of its securities, except for the compensation of
trustees and officers of the Fund who are employed by the Company. Under some
circumstances, particularly in connection with the introduction of new funds and
special promotions, EVM or BMR may waive a portion of its fee and pay for some
expenses of the Fund.
EVM has entered into an investment advisory agreement for each separately
managed account, which sets forth the account's investment objectives and fee
schedule. EVM invests the assets of the accounts in accordance with the stated
investment objectives. The Company's investment counselors may assist clients in
formulating investment strategies.
MARKETING AND DISTRIBUTION OF FUND SHARES
The Company markets and distributes continuously-offered shares of Funds through
EVD. EVD sells Fund shares through a retail network of national and regional
broker/dealers, banks, insurance companies and financial planning firms.
Although the firms in the Company's retail distribution network have each
entered into selling agreements with the Company, such agreements (which
generally are terminable by either party) do not legally obligate the firms to
sell any specific amount of the Company's investment products. For the 1999,
1998 and 1997 calendar years, the five dealer firms responsible for the largest
volume of Fund sales accounted for approximately 28%, 35% and 36%, respectively,
of the Company's Fund sales volume. EVD currently maintains a sales force of
more than 38 wholesalers and 37 sales assistants. Wholesalers and their
assistants work closely with the retail distribution network to assist in
selling shares of Funds.
While a substantial majority of fund sales are made through national and large
regional firms, in 1990 the Company embarked on a program to broaden its
channels of distribution by establishing the Independent Financial Institutions
sales force, a separate wholesaling force focusing on banks and financial
planners. In an additional distribution initiative in 1997, the Company began
offering its Funds to investors, without sales commissions or other transaction
fees, through fee-based registered investment advisors via various institutional
programs both domestically and internationally.
EVD currently sells its U.S. registered Funds with up to four separate
commission structures: 1) front-end load commission (Class A); 2) spread-load
commission (Class B); 3) level-load commission (Class C); and 4) institutional
(Class I). For Class A shares, the shareholder pays the broker's commission and
EVD receives an underwriting commission of up to 75 basis points of the dollar
value of the Fund or Class shares sold. The Fund pays a service fee to
authorized firms not to exceed 25 basis points of average net assets and may
also pay a Rule 12b-1 fee not to exceed 25 basis points of average daily net
assets.
For Class B shares, EVD pays a commission to the dealer at the time of sale and
such payments are capitalized and amortized in the Company's financial
statements over a four- to six-year period. The shareholder pays a contingent
deferred sales charge to EVD if he or she redeems shares within a four-, five-
or six-year period from the date of purchase. EVD uses its own funds (which may
be borrowed) to pay such commissions. EVD recovers the dealer commissions paid
on behalf of the shareholder through distribution plan payments limited to an
annual rate of 75 basis points of the average net assets of the Fund or Class in
accordance with a distribution plan adopted by the Fund pursuant to Rule 12b-1
under the Investment Company Act of 1940. Like the investment advisory
agreement, the distribution plan and related payments must be approved annually
by a vote of the trustees, including a majority of the independent trustees. The
SEC has taken the position that Rule 12b-1 would not permit a Fund to continue
making compensation payments to EVD after termination of the plan and that any
continuance of such payments may subject the Fund to legal action. These
distribution plans are terminable at any time without notice or penalty. In
addition, the Fund or Class pays a service fee to authorized firms not to exceed
25 basis points of average net assets.
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6
ITEM 1. BUSINESS (CONTINUED)
For Class C shares, the shareholder pays no front-end commissions or contingent
deferred sales charges after the first year. EVD pays a commission and the first
year's service fees to the dealer at the time of sale. The Fund makes monthly
distribution plan payments to EVD similar to those for Class B shares, equal to
75 basis points of average net assets of the Class. The Fund pays service fees
at an annual rate not to exceed 25 basis points of average net assets. The
introduction of level-load shares is consistent with the efforts of many
broker/dealers to rely less on transaction fees and more on continuing fees for
servicing assets.
For Class I shares, a minimum investment of $250,000 or higher is required and
the shareholder pays no sales charges. The introduction of institutional shares
has made a number of funds available to a broader group of financial
intermediaries.
In addition to its U.S. registered Funds, the Company also sponsors a family of
Cayman Island domiciled offshore funds known as the Eaton Vance Medallion family
of funds. The Medallion Funds are sold by certain dealer firms through EVD to
non-U.S. persons, with commission structures similar to those of the U.S.
registered Funds. The Company earns distribution, administration and advisory
fees directly or indirectly from the Medallion Funds.
Reference is made to Note 14 of the Notes to Consolidated Financial Statements
contained in the Eaton Vance Corp. Annual Report to Shareholders for the fiscal
year ended October 31, 1999 (which report is furnished as Exhibit 13.1 hereto)
for a description of the major customers that provided over 10% of the total
revenue of the Company.
SIGNIFICANT ACCOUNTING CHANGE
In September 1998, the Financial Accounting Standards Board ("FASB") staff
addressed the accounting for offering costs incurred in connection with the
distribution of funds when the adviser does not receive both Rule 12b-1 fees and
contingent deferred sales charges. In its announcement, the FASB staff concluded
that such offering costs, including sales commissions paid, were to be
considered start-up costs in accordance with American Institute of Certified
Public Accountants, Statement of Position ("SOP") 98-5, "Reporting on the Costs
of Start-Up Activities." The FASB staff concluded that subsequent to July 23,
1998, the effective date of the announcement, these offering costs should be
expensed as incurred. Prior to the FASB staff announcement, it had been the
Company's policy to capitalize and amortize these costs over a period not to
exceed five years.
In order to comply with the requirements of both the FASB staff announcement and
SOP 98-5, the Company expensed all offering costs incurred subsequent to July
23, 1998 in connection with the distribution of its closed-end funds and bank
loan interval funds which did not have both Rule12b-1 fees and contingent
deferred sales charges. The Company also expensed closed-end, interval and
private fund sales commissions paid and capitalized prior to and including the
July 23, 1998 effective date of the FASB staff announcement as a cumulative
effect of change in accounting principle, as described in APB Opinion No. 20,
"Accounting Changes," upon adoption of SOP 98-5 by the Company effective
November 1, 1998. The cumulative effect of the adoption in the first fiscal
quarter of 1999 was $36.6 million, net of income taxes of $23.4 million.
In April 1999, the bank loan interval funds received shareholder approval and a
Securities and Exchange Commission ("SEC") exemptive order permitting them,
beginning May 1, 1999, to implement Rule 12b-1 equivalent distribution plans.
With the implementation of these distribution plans, the Company resumed
capitalizing and amortizing sales commissions associated with the distribution
of these funds effective May 1, 1999, the beginning of the third fiscal quarter.
Closed-end and bank loan interval fund sales commissions expensed from November
1, 1998 to April 30, 1999 totaled $71.3 million.
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7
ITEM 1. BUSINESS (CONTINUED)
The change in accounting treatment has not had, nor will have, any effect on the
Company's cash flow or cash position.
FORWARD-LOOKING STATEMENTS
From time to time, information provided by the Company or information included
in its filings with the SEC (including this Form 10-K) may contain statements,
which are not historical facts, for this purpose referred to as "forward-looking
statements." The Company's actual future results may differ significantly from
those stated in any forward-looking statements. Important factors that could
cause actual results to differ materially from those indicated by such
forward-looking statements include, but are not limited to, the factors
discussed in "Competitive Conditions and Risk Factors" below.
COMPETITIVE CONDITIONS AND RISK FACTORS
The Company is subject to substantial competition in all aspects of its
business. The Company's ability to market investment products is highly
dependent on access to the retail distribution systems of national and regional
securities dealer firms, which generally offer competing internally and
externally managed investment products. Although the Company has historically
been successful in gaining access to these channels, there can be no assurance
that it will continue to do so. The inability to have such access could have a
material adverse effect on the Company's business.
There are few barriers to entry by new investment management firms. The
Company's funds compete against an ever increasing number of investment products
sold to the public by investment dealers, banks, insurance companies and others
that sell tax-free investments, taxable income funds, equity funds and other
investment products. Many institutions competing with the Company have greater
resources than the Company. The Company competes with other providers of
investment products offered, the investment performance of such products,
quality of service, fees charged, the level and type of sales representative
compensation, the manner in which such products are marketed and distributed and
the services provided to investors.
The Company derives almost all of its revenue from investment adviser and
administration fees and distribution income received from the Eaton Vance Funds
and separately managed accounts. As a result, the Company is dependent upon the
contractual relationships it maintains with these funds and separately managed
accounts. In the event that any of the management contracts, administration
contracts, underwriting contracts or service agreements are not renewed pursuant
to the terms of these contracts or agreements, the Company's financial results
may be adversely affected.
The major sources of revenue for the Company (i.e., investment adviser fees and
distribution income) are calculated as percentages of assets under management. A
decline in securities prices in general would reduce fee income. Also, financial
market declines or adverse changes in interest rates would negatively impact the
Company's assets under management and consequently, its revenue and net income.
If, as a result of inflation, expenses rise and assets under management decline,
lower fee income and higher expenses would reduce or eliminate profits. If
expenses rise and assets rise, bringing increased fees to offset the increased
expenses, profits might not be affected by inflation. There is no predictable
relationship between changes in financial assets under management and the rate
of inflation.
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8
ITEM 1. BUSINESS (CONTINUED)
REGULATION
EVM and BMR are each registered with the SEC under the Advisers Act. The
Advisers Act imposes numerous obligations on registered investment advisers,
including fiduciary duties, recordkeeping requirements, operational requirements
and disclosure obligations. Most Eaton Vance Funds are registered with the SEC
under the Investment Company Act of 1940. Except for private Funds exempt from
registration, each Fund is also required to make notice filings with all states
where it is offered for sale. Virtually all aspects of the Company's investment
management business are subject to various federal and state laws and
regulations. These laws and regulations are primarily intended to benefit
shareholders of the Funds and investment counseling clients and generally grant
supervisory agencies and bodies broad administrative powers, including the power
to limit or restrict the Company from carrying on its investment management
business in the event that it fails to comply with such laws and regulations. In
such event, the possible sanctions which may be imposed include the suspension
of individual employees, limitations on EVM or BMR engaging in the investment
management business for specified periods of time, the revocation of EVM's or
BMR's registration as an investment adviser and other censures or fines.
EVD is registered as a broker/dealer under the Securities Exchange Act of 1934
and is subject to regulation by the SEC, the National Association of Securities
Dealers ("NASD") and other federal and state agencies. EVD is subject to the
SEC's net capital rule designed to enforce minimum standards regarding the
general financial condition and liquidity of a broker/dealer. Under certain
circumstances, this rule limits the ability of the Company to make withdrawals
of capital and receive dividends from EVD. On February 18, 1999, the Company
identified that EVD was in violation of its net capital requirements since
January 31, 1999. Upon identification of the violation, the Company notified the
SEC and NASD and immediately remedied the violation. Net capital subsequent to
the remedy exceeded EVD's net capital requirement. The securities industry is
one of the most highly regulated in the United States, and failure to comply
with related laws and regulations can result in the revocation of broker/dealer
licenses, the imposition of censures or fines and the suspension or expulsion
from the securities business of a firm, its officers or employees.
The Company's officers, directors and employees may from time to time own
securities that are held by one or more of the Funds. The Company's internal
policies with respect to individual investments by investment professionals
require prior clearance of most types of transactions and reporting of all
securities transactions, and restrict certain transactions to avoid the
possibility of conflicts of interest.
EMPLOYEES
On October 31, 1999, the Company and its wholly owned subsidiaries had 395
full-time employees. On October 31, 1998, the comparable figure was 367.
<PAGE>
9
ITEM 2. PROPERTIES
Northeast Properties, LLC, a wholly owned subsidiary of the Company, owns an
investment property in Springfield, Massachusetts. For information with respect
to this property, reference is made to Schedule III and Note 4 of the Notes to
Consolidated Financial Statements contained in the Eaton Vance Corp. 1999 Annual
Report to Shareholders (Exhibit 13.1 hereto), both of which are incorporated
herein by reference.
As noted in Schedule III and Note 4 to Consolidated Financial Statements
contained in the Eaton Vance Corp. 1999 Annual Report to Shareholders, in 1999
the Company sold a warehouse in Colonie, New York , a shopping center and office
building in Troy, New York and two office buildings in Boston, Massachusetts.
The Company expects the sale of the remaining property in Springfield,
Massachusetts to be completed in fiscal 2000.
The Company conducts its principal operations through leased offices located in
Boston, Massachusetts. Management believes that the Company's facilities are
adequate to serve its currently anticipated business needs.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries is currently subject to any
material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of holders of Voting Common Stock ("Stockholders") of Eaton
Vance Corp. was held at the principal office of the Company on October 13, 1999.
All of the outstanding Voting Common Stock, namely 77,440 shares, was
represented in person at the meeting.
The following matters received the affirmative vote of the outstanding Voting
Common Stock and were approved:
1) The authorization to repurchase 2,000,000 shares of the Company's Non-voting
Common Stock.
2) The Restricted Stock Plan, adopted by the Board of Directors on October 13,
1999.
3) The revisions to the 1998 Executive Loan Program, adopted by the Board of
Directors on October 15, 1998.
<PAGE>
10
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Voting Common Stock, $0.015625 par value, is not publicly traded
and is held by 11 Voting Trustees pursuant to the Voting Trust described in
paragraph (A) of Item 12 hereof, which paragraph (A) is incorporated herein by
reference.
The Company's Non-Voting Common Stock, $0.015625 par value, is traded on the New
York Stock Exchange under the symbol EV. The approximate number of holders of
record of the Company's Non-Voting Common Stock at October 31, 1999, was 950.
The additional information required to be disclosed in Item 5 is found on page 7
of the Company's 1999 Annual Report to Shareholders (furnished as Exhibit 13.1
hereto), under the caption "Price and Dividend Information" and is incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data appearing under the caption "Five Year Summary" on page
13 of the Company's 1999 Annual Report to Shareholders, furnished as Exhibit
13.1 hereto, is incorporated by reference. A reference is also made to the
discussion of the significant accounting change on page 6 of Item 1 of this
document.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's Discussion and Analysis of financial condition and results of
operations appearing on pages 14 through 22 of the Company's 1999 Annual Report
to Shareholders, furnished as Exhibit 13.1 hereto, is incorporated herein by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and Qualitative Disclosures about Market Risk appearing under the
caption of "Market Risk" within Management's Discussion and Analysis of
financial condition and results of operations appearing on page 22 of the
Company's 1999 Annual Report to Shareholders, furnished as Exhibit 13.1 hereto,
is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements and related notes thereto and
the independent auditors' report appearing on pages 23 through 41 of the
Company's 1999 Annual Report to Shareholders, furnished as Exhibit 13.1 hereto,
are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
<PAGE>
11
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the name, age and positions of each of the
Company's directors and executive officers at December 31, 1999:
NAME AGE POSITION
- -------------------------------------------------------------------------------
James B. Hawkes 58 Chairman of the Board, President,
Chief Executive Officer
Benjamin A. Rowland, Jr. 64 Vice President and Director
John G. L. Cabot 65 Director
John M. Nelson 67 Director
Vincent M. O'Reilly 61 Director
Ralph Z. Sorenson 66 Director
Alan R. Dynner 59 Vice President and Chief Legal Officer
Thomas E. Faust, Jr. 41 Vice President and Director of Equity
Research and Management
Thomas Otis 68 Vice President and Secretary
Laurie G. Russell 33 Vice President and Chief Accounting Officer
William M. Steul 57 Vice President, Treasurer and Chief
Financial Officer
Peter D. Stokinger 35 Vice President and Internal Auditor
Wharton P. Whitaker 55 President, Eaton Vance Distributors, Inc.
Eaton Vance Corp. was founded as a holding company by Eaton & Howard, Vance
Sanders, Inc. in February 1981. Eaton & Howard, Vance Sanders, Inc. (renamed
Eaton Vance Management, Inc. in June, 1984 and reorganized as Eaton Vance
Management in October, 1990) was formed at the time of the acquisition of Eaton
& Howard, Incorporated by Vance, Sanders & Company, Inc. on May 1, 1979. In this
Item 10, the absence of a corporate name indicates that, depending on the dates
involved, the executive held the indicated titles in a firm in the chain of
Vance, Sanders & Company, Inc., Eaton & Howard, Vance Sanders Inc., or Eaton
Vance Corp. In general, the following officers hold their positions for a period
of one year or until their successors are duly chosen or elected.
Mr. Hawkes was elected Chairman of the Board in October, 1997 and President and
Chief Executive Officer in October, 1996. He was Executive Vice President of the
Company from January, 1990 to October, 1996 and a Vice President of the Company
from June, 1975 to January, 1990. He has been a Director since January, 1982.
Mr. Hawkes serves as Chairman of the Executive Committee and as a member of the
Management and Nominating Committees established by the Company's Board of
Directors. Mr. Hawkes is an officer, trustee or director of all the registered
investment companies for which Eaton Vance Management or Boston Management and
Research acts as investment adviser.
Mr. Rowland has been a Vice President of the Company since April, 1969 and a
Director since January, 1982. He serves as a member of the Management Committee
established by the Company's Board of Directors.
Mr. Cabot has served as a Director of the Company since March, 1989. He is
Chairman of the Audit and Nominating Committees and serves as a member of the
Compensation and Option Committees established by the Company's Board of
Directors. Mr. Cabot is also a Director of Cabot Corporation and Cabot Oil and
Gas Corporation.
<PAGE>
12
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
Mr. Nelson has served as Director of the Company since January, 1998. He serves
as a member of the Compensation, Option and Nominating Committees established by
the Company's Board of Directors. Mr. Nelson is a Director of the TJX Companies,
Brown & Sharpe Manufacturing Company, Commerce Holdings, Inc. and Stocker and
Yale, Inc.
Mr. O'Reilly has served as a Director of the Company since April, 1998. He
serves as a member of the Audit and Nominating Committees established by the
Company's Board of Directors. Mr. O'Reilly serves as a faculty member at the
Carroll Graduate School of Management at Boston College and as a Director of the
Neiman Marcus Group and Teradyne, Inc. Mr. O'Reilly is also Vice-Chairman of the
Board of the New England Independent System Operator.
Mr. Sorenson has served as a Director of the Company since March, 1989. He is
Chairman of both the Compensation and Option Committees and serves as a member
of both the Audit and Nominating Committees established by the Company's Board
of Directors. Mr. Sorenson also serves as a Director of Houghton Mifflin
Company, Polaroid Corporation, Northern Trust Bank of Colorado, Exabyte Corp.
and Whole Foods Market.
Mr. Dynner has been a Vice President and Chief Legal Officer of the Company
since November, 1996. Prior to joining the Company, Mr. Dynner was a senior
partner with the law firm of Kirkpatrick & Lockhart LLP in its New York and
Washington, D.C. offices. From February, 1994 to September, 1995 he was
Executive Vice President of Newberger & Berman Management, Inc., a mutual fund
management company. Mr. Dynner is a member of the Management Committee
established by the Company's Board of Directors. He is an officer of all the
registered investment companies for which Eaton Vance Management and Boston
Management and Research acts as investment adviser.
Mr. Faust has been a Vice President and Director of Equity Research and
Management of the Company since February, 1995. He has been Portfolio Manager
and Vice President of Investors Portfolio since July, 1993 and Portfolio Manager
and Vice President of Eaton Vance Growth Portfolio since April, 1996. Mr. Faust
joined Eaton Vance as a Research Associate in June, 1985. Mr. Faust serves as a
member of the Management Committee established by the Company's Board of
Directors.
Mr. Otis has been Secretary since October, 1969 and a Vice President of the
Company since April, 1973. He has been the Company's counsel since 1966.
Ms. Russell has been Chief Accounting Officer since October, 1997 and a Vice
President since June, 1994. She was the Internal Auditor of the Company from
June, 1994 to October, 1997. Prior to joining the Company, Ms. Russell was a
Senior Accountant with Deloitte & Touche LLP.
Mr. Steul has been a Vice President and Chief Financial Officer of the Company
since December, 1994. Prior to joining the Company, Mr. Steul was Vice
President, Finance and Chief Financial Officer of Digital Equipment Corporation.
Mr. Steul is a member of the Management Committee established by the Company's
Board of Directors.
Mr. Stokinger has been the Internal Auditor since October, 1997 and a Vice
President since January, 1996. He was the Company's Tax Accountant from
September, 1992 to October, 1997.
Mr. Whitaker has been President, Eaton Vance Distributors, Inc., since November,
1991. He was Executive Vice President and National Sales Director of Eaton Vance
Distributors, Inc., from June, 1987 to October, 1991. Mr. Whitaker is a member
of the Management Committee established by the Company's Board of Directors.
<PAGE>
13
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and Directors and persons who own more than ten percent of a registered
class of the Company's equity securities to file forms reporting their
affiliation with the Company and reports of ownership and changes in ownership
of the Company's equity securities with the Securities and Exchange Commission
and the New York Stock Exchange. These persons and entities are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file. To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company, during fiscal 1999 all Section 16(a) filing
requirements applicable to such individuals were complied with except for a
report covering one transaction filed late by each of Benjamin A. Rowland, John
Cabot and Peter Stokinger. Also, Landon Clay, a beneficial owner of greater than
10 percent of the Company's Non-Voting Common Stock, did not file his Form 5 on
a timely basis.
<PAGE>
14
ITEM 11. EXECUTIVE COMPENSATION
(A) SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning the compensation
for each of the last three fiscal years of the Chief Executive Officer of the
Company and the four other most highly compensated executive officers of the
Company (hereafter referred to in this document as the "named executive
officers").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
-------------------------------------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION(2)
- --------------------------------------------------------------------------------------------------------------------------
NAME AND PRINCIPAL POSITION ($) ($) ($) (#) ($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
James B. Hawkes 1999 430,000 1,750,000 4,894 70,000 30,000
Chief Executive Officer
1998 415,000 1,410,000 4,038 70,000 30,000
1997 400,000 755,000 1,350 400,000 30,000
- --------------------------------------------------------------------------------------------------------------------------
Alan R. Dynner 1999 265,000 350,000 9,414 20,000 30,000
Vice President
1998 260,000 300,000 8,095 15,000 30,000
1997 250,000 260,000 - 120,000 30,000
- --------------------------------------------------------------------------------------------------------------------------
Thomas E. Faust, Jr. 1999 315,000 1,535,000 51,941 40,000 30,000
Vice President
1998 300,000 1,250,000 56,709 39,600 30,000
1997 250,000 1,060,000 6,968 60,000 30,000
- --------------------------------------------------------------------------------------------------------------------------
William M. Steul 1999 270,000 350,000 9,399 20,000 30,000
Vice President
1998 266,000 300,000 4,865 15,000 30,000
1997 260,000 240,000 4,509 24,000 30,000
- --------------------------------------------------------------------------------------------------------------------------
Wharton P. Whitaker 1999 249,000 1,340,819 9,425 20,000 30,000
President, EVD
1998 245,000 977,417 8,108 15,000 30,000
1997 235,000 588,814 1,252 24,000 30,000
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
15
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
(1) The amounts appearing under "Other Annual Compensation" represent the
10% discount on the purchase of the Company's stock under the
Company's Employee Stock Purchase Plan and Incentive Plan - Stock
Alternative.
(2) The amounts appearing under "All Other Compensation" represent
contributions by the Company to the Company's Profit Sharing Plans,
Supplemental Profit Sharing and 401(k) Plans.
(B) OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes stock option grants during 1999 to the named
executive officers:
<TABLE>
<CAPTION>
PERCENTAGE POTENTIAL REALIZABLE
OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION
UNDERLYING EMPLOYEES IN PRICE EXPIRATION FOR OPTION TERM(1)
NAME OPTIONS GRANTED FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
James B. Hawkes 65,645 9% 22.9375 11/02/06 416,006 919,265
4,355 1% 25.2313 11/02/03 30,358 67,084
Alan R. Dynner 20,000 3% 22.9375 11/02/06 126,744 280,071
Thomas E. Faust, Jr. 35,645 5% 22.9375 11/02/06 225,890 499,157
4,355 1% 25.2313 11/02/03 30,358 67,084
William M. Steul 20,000 3% 22.9375 11/02/06 126,744 280,071
Wharton P. Whitaker 20,000 3% 22.9375 11/02/06 126,744 280,071
(1) Amounts calculated using 5% and 10% assumed annual rates of stock price appreciation represent hypothetical gains that
could be achieved for the respective options if exercised at the end of the option term. Actual gains, if any, on stock
option exercises will depend on the future performance of the Company's stock and the dates on which the options are exercised.
</TABLE>
<PAGE>
16
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
(C) AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table summarizes stock options exercised during 1999 and stock
options held as of October 31, 1999 by the named executive officers.
<TABLE>
<CAPTION>
NUMBER OF
SHARES SECURITIES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNEXERCISED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT FISCAL
EXERCISE REALIZED YEAR END YEAR END (1)
------------- ------------- ------------------------------- ---------------------------------
EXERCISABLE UN-EXERCISABLE EXERCISABLE UN-EXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- ------------------------- ------------- ------------- ---------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
James B. Hawkes 25,000 310,468 247,200 307,800 5,671,511 6,115,465
Thomas E. Faust, Jr. 45,000 970,671 63,200 92,800 1,427,643 1,515,201
Alan R. Dynner - - 84,700 70,300 1,954,354 1,332,123
William M. Steul 96,460 2,438,220 44,000 35,000 1,112,522 470,173
Wharton P. Whitaker 11,288 127,878 17,992 35,000 427,319 470,173
(1) Based on the fair market value of the Company's common stock on October 31, 1999 ($34.188) as reported on the New York
Stock Exchange, less the option exercise price.
</TABLE>
(D) COMPENSATION OF DIRECTORS
Directors not otherwise employed by the Company receive a retainer of $5,000 per
quarter and $1,000 per meeting. During the fiscal year ended October 31, 1999,
John G.L. Cabot and Ralph Z. Sorenson each received $31,000; in addition, each
was granted options for 2,981 shares. During the fiscal year ended October 31,
1999, John M. Nelson and Vincent M. O'Reilly each received $28,000; in addition,
each was granted options for 2,981 shares.
(E) COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Not applicable.
<PAGE>
17
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A) COMMON STOCK
All outstanding shares of the Company's Voting Common Stock, $0.015625 par value
(which is the only class of the Company's stock having voting rights) are
deposited in a Voting Trust, of which the Voting Trustees were (as of December
31, 1999), James B. Hawkes, Thomas E. Faust, Jr., Alan R. Dynner, William M.
Steul, Wharton P. Whitaker, Thomas J. Fetter, Duncan W. Richardson, Jeffery P.
Beale, Scott H. Page, Payson F. Swaffield, and Michael W. Weilheimer. The Voting
Trust expires October 30, 2000. The Voting Trustees have unrestricted voting
rights to elect the Company's directors. At December 31, 1999, the Company had
outstanding 77,440 shares of Common Stock. Inasmuch as the eleven Voting
Trustees of the Voting Trust have unrestricted voting rights with respect to the
Common Stock (except that the Voting Trust Agreement provides that the Voting
Trustees shall not vote such Stock in favor of the sale, mortgage or pledge of
all or substantially all of the Company's assets or for any change in the
capital structure or powers of the Company or in connection with a merger,
consolidation, reorganization or dissolution of the Company or the termination
of the Voting Trust or the addition of a Voting Trustee or of the removal of a
Voting Trustee by the other Voting Trustees or the renewal of the term of the
Voting Trust without the written consent of the holders of Voting Trust Receipts
representing at least a majority of such Stock subject at the time to the Voting
Trust Agreement), they may be deemed to be the beneficial owners of all of the
Company's outstanding Common Stock by virtue of Rule 13d-3(a)(1) under the
Securities Exchange Act of 1934. The Voting Trust Agreement provides that the
Voting Trustees shall act by a majority if there are five or more Voting
Trustees; otherwise they shall act unanimously except as otherwise provided in
the Voting Trust Agreement. The address of the Voting Trustees is 255 State
Street, Boston, Massachusetts 02109.
The following table sets forth the beneficial owners at December 31, 1999, of
the Voting Trust Receipts issued under said Voting Trust Agreement, which
Receipts cover the aggregate of 77,440 shares of the Common Stock then
outstanding:
NUMBER OF SHARES OF
VOTING COMMON STOCK
TITLE OF CLASS NAME COVERED BY RECEIPTS % OF CLASS
- -------------------------------------------------------------------------------
Voting Common Stock James B. Hawkes 18,560 24%
Voting Common Stock Thomas E. Faust, Jr. 13,953 18%
Voting Common Stock Alan R. Dynner 9,279 12%
Voting Common Stock William M. Steul 9,279 12%
Voting Common Stock Wharton P. Whitaker 9,279 12%
Voting Common Stock Thomas J. Fetter 3,873 5%
Voting Common Stock Duncan W. Richardson 3,873 5%
Voting Common Stock Jeffrey P. Beale 2,336 3%
Voting Common Stock Scott H. Page 2,336 3%
Voting Common Stock Payson F. Swaffield 2,336 3%
Voting Common Stock Michael W. Weilheimer 2,336 3%
<PAGE>
18
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT (CONTINUED)
Mr. Hawkes is an officer and Director of the Company and Voting Trustee of the
Voting Trust; Messrs. Dynner, Faust and Steul are all officers of the Company
and Voting Trustees of the Voting Trust; Mr. Whitaker is President of Eaton
Vance Distributors, Inc. and a Voting Trustee of the Voting Trust; Messrs.
Fetter, Richardson, Beale, Page Swaffield and Weilheimer are officers of Eaton
Vance Management and Voting Trustees of the Voting Trust. No transfer of any
kind of the Voting Trust Receipts issued under the Voting Trust may be made at
any time unless they have first been offered to the Company at book value. In
the event of the death or termination of employment with the Company or a
subsidiary of a holder of the Voting Trust Receipts, the shares represented by
such Voting Trust Receipts must be offered to the Company at book value. Similar
restrictions exist with respect to the Voting Common Stock, all shares of which
are deposited and held of record in the Voting Trust.
(B) NON-VOTING COMMON STOCK
The Articles of Incorporation of the Company provide that its Non-Voting Common
Stock, $0.015625 par value, shall have no voting rights under any circumstances
whatsoever. As of December 31, 1999, the officers and Directors of the Company,
as a group, beneficially owned 3,418,764 shares of such Non-Voting Common Stock
or 10% of the 35,411,631 shares then outstanding. (Such figures include 735,648
shares subject to options exercisable within 60 days and are based solely upon
information furnished by the officers and Directors.)
The following table sets forth the beneficial ownership of the Company's
Non-Voting Common Stock by (i) each person known by the Company to own
beneficially more than 5% of the outstanding shares of Non-Voting Common Stock,
(ii) each Director of the Company, and (iii) each of the named executive
officers of the Company (as defined in Item 11, "Executive Compensation") as of
December 31, 1999 (such investment power being sole unless otherwise indicated):
AMOUNT OF PERCENTAGE
BENEFICIAL OF
TITLE OF CLASS BENEFICIAL OWNERS OWNERSHIP (A) CLASS (B)
- -------------------------- ----------------------------------------------------
Non-Voting Common Stock Landon T. Clay 5,783,844 (d) 16.33
Non-Voting Common Stock James B. Hawkes 1,312,045 (c)(f) 3.63
Non-Voting Common Stock Benjamin A. Rowland,Jr. 798,002 (c)(e) 2.21
Non-Voting Common Stock Thomas E. Faust, Jr. 383,635 (c) 1.06
Non-Voting Common Stock Wharton P. Whitaker 328,821 (c) 0.91
Non-Voting Common Stock William M. Steul 155,281 (c) 0.43
Non-Voting Common Stock Alan R. Dynner 125,500 (c) 0.35
Non-Voting Common Stock John G. L. Cabot 101,021 (c)(g) 0.29
Non-Voting Common Stock Ralph Z. Sorenson 44,433 (c) 0.12
Non-Voting Common Stock John M. Nelson 5,577 (c) 0.02
Non-Voting Common Stock Vincent M. O'Reilly 1,993 (c) 0.01
<PAGE>
19
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(CONTINUED)
(a) Based solely upon information furnished by the individuals.
(b) Based on 35,411,631 outstanding shares plus options exercisable within
60 days of 388,311 for Mr. Hawkes, 12,422 for Mr. Rowland, 104,311 for
Mr. Faust, 20,464 for Mr. Whitaker, 46,472 for Mr. Steul, 122,894 for
Mr. Dynner, 6,777 for Mr. Cabot, 6,777 for Mr. Sorenson, 1,577 for Mr.
Nelson and 1,393 for Mr. O'Reilly.
(c) Includes shares subject to options exercisable within 60 days granted
to, but not exercised by, each named executive officer and directors as
listed in Note (b) above.
(d) Includes 10,000 shares held by Mr. Clay's children, 4,180 shares held
in the trust of a profit sharing retirement plan for employees of
Flowers Antigua, of which the sole beneficiary is the spouse of Mr.
Clay and 25,420 shares held in trust of a profit sharing retirement
plan for employees of LTC Corp., wholly owned by Mr. Clay.
(e) Includes 4,800 shares owned by Mr. Rowland's spouse as to which Mr.
Rowland disclaims beneficial ownership.
(f) Includes 46,580 shares owned by Mr. Hawkes' spouse and 29,721 shares
held by Mr. Hawkes' daughter.
(g) Includes 16,000 shares held in a family limited partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(A) Not applicable.
(B) CERTAIN BUSINESS RELATIONSHIPS
James B. Hawkes, a Director and chief executive officer of the Company, is an
officer and director, trustee or general partner of various investment companies
for which either EVM or BMR serves as investment adviser and for which EVD acts
as principal underwriter; such investment companies make substantial payments to
these subsidiaries for advisory and management services or under their
distribution plans.
(C) INDEBTEDNESS OF MANAGEMENT
In 1998, the Company increased to $10,000,000 the amount of money in the
Executive Loan Program, which is available for loans to certain key employees
for the purpose of financing the exercise of stock options for shares of the
Company's Non-Voting Common Stock. Such loans are written for a seven-year
period, at varying fixed interest rates, and notes evidencing them require
repayment in annual installments commencing with the third year in which the
loan is outstanding. Loans outstanding under this program amounted to $2,231,000
at October 31, 1999.
<PAGE>
20
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED)
The following table sets forth the executive officers and Directors of the
Company who were indebted to the Company under the foregoing loan programs at
any time since November 1, 1998, in an aggregate amount in excess of $60,000:
LARGEST AMOUNT OF LOANS RATE OF INTEREST
LOANS OUTSTANDING OUTSTANDING AS CHARGED ON LOANS
SINCE 11/1/98 OF 12/31/99 AS OF 12/31/99
- ------------------------------------------------------------------------------
James B. Hawkes $ 545,012 $ 545,012 4.83% - 7.61% (1)
Thomas E. Faust 81,758 - n/a
Benjamin A. Rowland, Jr. 186,620 152,620 5.63%
Wharton P. Whitaker 99,998 99,925 6.43%
(1) 6.11% interest payable on $66,000 principal amount of loan, 5.31% interest
payable on $109,821 principal amount, 5.74% interest payable on $44,171
principal amount, 7.61% interest payable on $30,800 principal amount, 6.77%
interest payable on $100,000 principal amount and 4.83% interest payable on
$194,220 principal amount.
<PAGE>
21
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(1) The following consolidated financial statements of Eaton Vance Corp.
and report of independent accountants, included on pages 23 through 40
of the Annual Report, are incorporated by reference as a part of this
Form 10-K:
SEPARATE
DOCUMENT
EATON VANCE CORP. 1999 ANNUAL REPORT TO SHAREHOLDERS PAGE NUMBER
- -------------------------------------------------------------------------------
Consolidated Statements of Income for each of the three
years in the period ended October 31, 1999 23
Consolidated Balance Sheets as of October 31, 1999 and 1998 24-25
Consolidated Statements of Cash Flows for each of the three
years in the period ended October 31, 1999 26
Consolidated Statements of Shareholders' Equity and
Comprehensive Income for each of the three years in the period
ended October 31, 1999 27
Notes to Consolidated Financial Statements 28-40
Independent Auditors' Report 41
(2) The following consolidated financial statement schedules and
independent accountants' report are filed as part of this Form 10-K and
are located on the following pages:
DESCRIPTION PAGE NUMBER
- -------------------------------------------------------------------------------
Independent Auditors' Report on Financial Statement Schedules 22
Schedule II Valuation and Qualifying Accounts 23
Schedule III Real Estate and Accumulated Depreciation 24-25
All other schedules have been omitted because they are not required, are
not applicable or the information is otherwise shown in the consolidated
financial statements or notes thereto.
(3) The list of exhibits required by Item 601 of Regulation S-K is set
forth in the Exhibit Index on pages 28 through 31 and is incorporated
herein by reference.
(B) REPORTS ON FORM 8-K
The Company filed a Form 8-K with the SEC on May 3, 1999 regarding the impact of
a significant accounting change.
<PAGE>
22
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Eaton Vance Corp.:
We have audited the consolidated financial statements of Eaton Vance Corp. and
its subsidiaries as of October 31, 1999 and 1998, and for each of the three
years in the period ended October 31, 1999, and have issued our report thereon
dated November 30, 1999, which report includes an explanatory paragraph relating
to changes in the method of accounting for offering costs incurred in connection
with the distribution of closed-end funds; such consolidated financial
statements and report are included in your 1999 Annual Report to Shareholders
and are incorporated herein by reference. Our audits also included the
consolidated financial statement schedules of Eaton Vance Corp. and its
subsidiaries, listed in Item 14. These consolidated financial statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, such consolidated
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 30, 1999
<PAGE>
23
EATON VANCE CORP.
VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
- ------------------------------------------------------------------------------
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS OF YEAR
- -------------------------------------------------------------------------------
Valuation accounts deducted
from assets to which they
apply:
Allowance for doubtful
accounts on notes
receivable and
receivables from
affiliates:
Year ended October 31:
1999 - - - -
1998 - - - -
1997 $ 775,000 - $775,000 -
<PAGE>
24
EATON VANCE CORP.
REAL ESTATE AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
OCTOBER 31, 1999
- -----------------------------------------------------------------------------------------------------------------------------------
COSTS
CAPITALIZED GROSS CARRYING AMOUNT
INITIAL COST SUBSEQUENT OCTOBER 31, 1998(1)(2)
-------------------- TO ----------------------
ACQUISITION DATE OF DEPRE-
(IMPROVE- ACCUMULATED CONSTRUC- DATE CIABLE
DESCRIPTION ENCUMBRANCES LAND BUILDINGS MENTS) LAND BUILDINGS DEPRECIATION TION ACQUIRED TION
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Warehouse -
Springfield, MA - 145,833 1,967,684 193,338 145,833 2,161,022 855,716 1974 11/02/84 30 yrs
================================================================================================================================
(1) The aggregate cost of real estate for federal income tax purposes is approximately the same as the gross carrying amount
recorded for book purposes.
(2) All real estate is classified as available for sale at October 31, 1999.
</TABLE>
<PAGE>
25
<TABLE>
<CAPTION>
EATON VANCE CORP.
REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED) SCHEDULE III
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
- -------------------------------------------------------------------------------------------------------------------
1999 1998 1997
----------------- ----------------- ------------------
<S> <C> <C> <C>
LAND AND BUILDINGS:
Gross carrying amount, beginning of year - $20,532,859 $26,353,167
Additions during period:
Acquisition (1) - - 5,855,284
Improvements - 512,220 833,184
Deductions during period:
Cost of real estate sold - - (78,203)
Reclassification of assets held for sale (2) (3) - (21,045,079) (12,430,573)
======================================================
Gross carrying amount, end of year - - $20,532,859
======================================================
Accumulated depreciation, beginning of year - $4,494,720 $7,534,281
Additions during period:
Depreciation - 395,484 852,435
Deductions during period:
Reclassification of assets held for sale (2) (3) - (4,890,204) (3,891,996)
======================================================
Accumulated depreciation, end of year - - $4,494,720
======================================================
(1) In 1997, the Company acquired the remaining 50 percent interest in a partnership which owns an office building
in Boston, Massachusetts for $0.6 million in cash. The acquisition was accounted for using the purchase method
of accounting and, accordingly, the purchase price was allocated to the assets acquired and the liabilities
assumed based on their estimated fair values at the date of acquisition.
(2) In the first quarter of 1998, the Company committed to a plan to sell an office building and shopping center
located in Troy, New York and recognized a pre-tax impairment loss of $2.6 million based on the estimated net
realizable value of the property (estimated fair value less estimated selling costs). In the fourth quarter of
1996, the Company committed to a plan to sell an office building located in Boston, Massachusetts and recognized
a pre-tax impairment loss of $1.3 million based on the estimated net realizable value of the property. Estimated
fair value of the property was calculated using market appraisals and other available valuation techniques. At
October 31, 1996, the property was classified as a current asset held for sale for financial reporting purposes.
(3) In 1998, the Company committed to a plan to sell all of its remaining properties. The Company had committed to a
plan to sell two warehouse buildings located in Springfield, Massachusetts and Colonie, New York and a shopping
center in Goffstown, New Hampshire in 1997. See Note 4 of the Notes to the Consolidated Financial Statements for
a discussion of real estate assets.
</TABLE>
<PAGE>
26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Eaton Vance Corp. has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
EATON VANCE CORP.
/s/ James B. Hawkes
James B. Hawkes
Chairman, Director and Principal
Executive Officer
January 26, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Eaton Vance Corp.
and in the capacities and on the dates indicated:
/s/ James B. Hawkes Chairman, Director and January 26, 2000
James B. Hawkes Principal Executive Officer
/s/ William M. Steul Chief Financial Officer January 26, 2000
William M. Steul
/s/ Laurie G. Russell Chief Accounting Officer January 26, 2000
Laurie G. Russell
/s/ John G.L. Cabot Director January 26, 2000
John G.L. Cabot
/s/ John M. Nelson Director January 26, 2000
John M. Nelson
/s/ Vincent M. O'Reilly Director January 26, 2000
Vincent M. O'Reilly
/s/ Ralph Z. Sorenson Director January 26, 2000
Ralph Z. Sorenson
<PAGE>
27
EXHIBIT INDEX
Each Exhibit is listed in this index according to the number assigned to it in
the exhibit table set forth in Item 601 of Regulation S-K. The following
Exhibits are filed as a part of this Report or incorporated herein by reference
pursuant to Rule 12b-32 under the Securities Exchange Act of 1934:
EXHIBIT NO. DESCRIPTION
3.1 The Company's Amended Articles of Incorporation are filed as Exhibit 3.1
to the Company's registration statement on Form 8-B dated February 4,
1981, filed pursuant to Section 12(b) or (g) of the Securities Exchange
Act of 1934 (S.E.C. File No. 1-8100) and are incorporated herein by
reference.
3.2 The Company's By-Laws are filed as Exhibit 3.2 to the Company's
registration statement of Form 8-B dated February 4, 1981, filed pursuant
to Section 12(b) or (g) of the Securities Exchange Act of 1934 (S.E.C.
File No. 1-8100) and are incorporated herein by reference.
3.3 Copy of the Company's Articles of Amendment effective at the close of
business on November 22, 1983, has been filed as Exhibit 3.3 to the Annual
Report on Form 10-K of the Company for the fiscal year ended October 31,
1983, (S.E.C. File No. 1-8100) and is incorporated herein by reference.
3.4 Copy of the Company's Articles of Amendment effective at the close of
business on February 25, 1986 has been filed as Exhibit 3.4 to the Annual
Report on Form 10-K of the Company for the fiscal year ended October 31,
1986, (S.E.C. File No. 1-8100) and is incorporated herein by reference.
3.5 Copy of the Company's Articles of Amendment effective at the close of
business on July 7, 1998 has been filed as Exhibit 3.1 to the Quarterly
Report on Form 10-Q for the fiscal quarter ended July 31, 1998, (S.E.C.
File No. 1-8100) and is incorporated herein by reference.
4.1 The rights of the holders of the Company's Common Stock, par value
$.015625 per share, and Non-Voting Common Stock, par value $.015625 per
share, are described in the Company's Amended Articles of Incorporation
(particularly Articles Sixth, Seventh and Ninth thereof) and the Company's
By-Laws (particularly Article II thereof). See Exhibits 3.1, 3.2, 3.3, 3.4
and 3.5 above as incorporated herein by reference.
9.1 Copy of the Voting Trust Agreement made as of October 30, 1997. has been
filed as Exhibit 9.1 to the Annual Report on Form 10-K of the Company for
the fiscal year ended October 31, 1997, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.1 Description of Performance Bonus Arrangement for Members of Investment
Division of Eaton Vance Management has been filed as Exhibit 10.1 to the
Annual Report on Form 10-K of the Company for the fiscal year ended
October 31, 1995, (S.E.C. File No. 1-8100) and is incorporated herein by
reference.
<PAGE>
28
EXHIBIT NO. DESCRIPTION
10.2 Description of Incentive Bonus Arrangement for Marketing Personnel of
Eaton Vance Distributors, Inc. has been filed as Exhibit 10.2 to the
Annual Report on Form 10-K of the Company for the fiscal year ended
October 31, 1995, (S.E.C. File No. 1-8100) and is incorporated herein by
reference.
10.3 Copy of 1988 Profit Improvement Bonus Plan of Eaton Vance Management, Inc.
has been filed as Exhibit 10.9 of the Annual Report on Form 10-K of the
Company for the fiscal year ended October 31, 1987 (S.E.C. File No 1-8100)
and is incorporated herein by reference.
10.4 Description of 1990 Performance and Retention of Officers Pool (bonus plan
to reward key officers of Eaton Vance Management and Eaton Vance
Distributors, Inc.) of Eaton Vance Corp. has been filed as Exhibit 10.5 to
the Annual Report on Form 10-K of the Company for the fiscal year ended
October 31, 1995, (S.E.C. File No. 1-8100) and is incorporated herein by
reference.
10.5 Copy of 1992 Stock Option Plan as adopted by the Eaton Vance Corp. Board
of Directors on April 8, 1992 has been filed as Exhibit 10.12 to the
Annual Report on Form 10-K of the Company for the fiscal year ended
October 31, 1992 (S.E.C. File No. 1-8100) and is incorporated herein by
reference.
10.6 Copy of 1986 Employee Stock Purchase Plan as amended and restated by the
Eaton Vance Corp. Board of Directors on April 8, 1992 has been filed as
Exhibit 10.13 to the Annual Report on Form 10-K of the Company for the
fiscal year ended October 31, 1992 (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.7 Copy of 1992 Incentive Plan - Stock Alternative as adopted by the Eaton
Vance Corp. Board of Directors on July 17, 1992 has been filed as Exhibit
10. 14 to the Annual Report on Form 10-K of the Company for the fiscal
year ended October 31, 1992 (S.E.C. File No. 1-8100), and is incorporated
herein by reference.
10.8 Copy of 1995 Stock Option Plan as adopted by the Eaton Vance Corp. Board
of Directors on October 12, 1995, has been filed as Exhibit 10.9 to the
Annual Report on Form 10-K of the Company for the fiscal year ended
October 31, 1995, (S.E.C. File No. 1-8100) and is incorporated herein by
reference.
10.9 Copy of 1986 Employee Stock Purchase Plan as amended and restated by the
Eaton Vance Corp. Board of Directors on October 12, 1995, has been filed
as Exhibit 10.10 to the Annual Report on Form 10-K of the Company for the
fiscal year ended October 31, 1995, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.10 Copy of 1995 Executive Loan Program relating to financing or refinancing
the exercise of options by key directors, officers, and employees adopted
by the Company's Directors on October 12, 1995, has been filed as Exhibit
10.2 to the Annual Report on Form 10-K of the Company for the fiscal year
ended October 31, 1995, (S.E.C. File No. 1-8100) and is incorporated
herein by reference.
10.11 Copy of the Eaton Vance Corp. Supplemental Profit Sharing Plan adopted by
the Company's Directors on October 9, 1996, has been filed as Exhibit
10.12 to the Annual Report on Form 10-K of the Company for the fiscal year
ended October 31, 1996, (S.E.C. File No. 1-8100) and is incorporated
herein by reference.
<PAGE>
29
EXHIBIT NO. DESCRIPTION
10.12 Copy of 1992 Stock Option Plan - Restatement No. 1 as adopted by the Eaton
Vance Corp. Board of Directors on April 9, 1997, has been filed as Exhibit
10.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended
April 30, 1997, (S.E.C. File No. 1-8100) and is incorporated herein by
reference.
10.13 Copy of 1995 Stock Option Plan - Restatement No. 1 as adopted by the Eaton
Vance Corp. Board of Directors on April 9, 1997, has been filed as Exhibit
10.2 to the Quarterly Report on Form 10-Q for the fiscal quarter ended
April 30, 1997, (S.E.C. File No. 1-8100) and is incorporated herein by
reference.
10.14 Copy of 1992 Incentive Plan - Stock Alternative - Restatement No. 2 as
adopted by the Eaton Vance Corp. Board of Directors on April 9, 1997, has
been filed as Exhibit 10.3 to the Quarterly Report on Form 10-Q for the
fiscal quarter ended April 30, 1997, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.15 Copy of 1992 Stock Option Plan - Restatement No. 2 as adopted by the Eaton
Vance Corp. Board of Directors on October 30, 1997 has been filed as
Exhibit 10.15 to the Annual Report on Form 10-K of the Company for the
fiscal year ended October 31, 1997, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.16 Copy of 1995 Stock Option Plan - Restatement No. 2 as adopted by the Eaton
Vance Corp. Board of Directors on October 30, 1997 has been filed as
Exhibit 10.16 to the Annual Report on Form 10-K of the Company for the
fiscal year ended October 31, 1997, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.17 Copy of 1992 Incentive Plan - Stock Alternative - Restatement No. 3 as
adopted by the Eaton Vance Corp. Board of Directors on July 7, 1998, has
been filed as Exhibit 10.3 to the Quarterly Report on Form 10-Q for the
fiscal quarter ended July 31, 1998, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.18 Copy of 1986 Employee Stock Purchase Plan - Restatement No. 7 adopted by
the Eaton Vance Corp. Board of Directors on July 9, 1998, has been filed
as Exhibit 10.2 to the Quarterly Report on Form 10-Q of the Company for
the fiscal quarter ended July 31, 1998, (S.E.C. File No. 1-8100) and is
incorporated herein by reference.
10.19 Copy of 1998 Stock Option Plan as adopted by the Eaton Vance Corp. Board
of Directors on July 9, 1998 has been filed as Exhibit 10.1 to the
Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended
July 31, 1998 (S.E.C. File No. 1-8100) and is incorporated herein by
reference.
10.20 Copy of Eaton Vance Corp. Executive Performance-Based Compensation Plan as
adopted by the Eaton Vance Corp. Board of Directors on July 9, 1998 has
been filed as Exhibit 10.4 to the Quarterly Report on Form 10-Q of the
Company for the fiscal quarter ended July 31, 1998 (S.E.C. File No.
1-8100), and is incorporated herein by reference.
10.21 Copy of 1998 Executive Loan Program relating to financing or refinancing
the exercise of options by key directors, officers, and employees adopted
by the Company's Directors on October 15, 1998 (filed herewith).
<PAGE>
30
EXHIBIT NO. DESCRIPTION
10.22 Copy of 1999 Restricted Stock Plan as adopted by the Eaton Vance Corp.
Board of Directors on October 13, 1999 (filed herewith).
13.1 Copy of the Company's Annual Report to Shareholders for the fiscal year
ended October 31, 1999 (furnished herewith - such Annual Report, except
for those portions thereof which are expressly incorporated by reference
in this report on Form 10-K, is furnished solely for the information of
the Securities and Exchange Commission and is not to be deemed "filed" as
a part of this report on Form 10-K).
21.1 List of the Company's Subsidiaries as of October 31, 1999 (filed
herewith).
23.1 Independent Auditors' Consent (filed herewith).
27.1 Financial Data Schedule as of October 31, 1999 (filed herewith -
electronic filing only).
99.2 List of Eaton Vance Corp. Open Registration Statements (filed herewith).
<PAGE>
31
EXHIBIT 10.21
EATON VANCE CORP.
1998 EXECUTIVE LOAN PROGRAM
(AS REVISED OCTOBER 13, 1999)
1. Purpose. The purpose of the Eaton Vance Corp. 1998 Executive Loan
Program (the "Program") is to benefit Eaton Vance Corp. and its present or
future subsidiaries (together, or separately, the "Company," as the context may
require) by enhancing the Company's ability to attract and retain those
directors, officers and other key employees of the Company who are in a position
to make substantial contributions to the ongoing success of the Company. The
Program is intended to complement the incentives now offered by the Company to
its executives which allow them to acquire shares of Eaton Vance Corp.
Non-Voting Common Stock ("Eaton Vance Stock"). To accomplish this purpose, the
Program provides loans to finance exercises of incentive stock options and
non-qualified stock options granted under various stock option plans maintained
by the Company, including those granted up to and through 1998, all as the
Compensation Committee of the Board of Directors of Eaton Vance Corp. (the
"Committee") determines.
2. Participation. Participation in the Program shall be limited to
those directors, officers and key employees of the Company who are determined by
the Committee as being eligible to so participate (the "Participants").
3. Administration. The Committee shall administer the Program and have
exclusive power to determine (a) which directors, officers and key employees
shall become Participants, (b) the time or times at which such offer shall be
made, and (c) the amount to be loaned to any Participant. The interpretation and
instruction by the Committee of any provision of the Program or of any agreement
or other matter related to the Program shall be final unless otherwise
determined by the Committee or the Board of Directors. The Committee may
delegate any of its powers and responsibilities under the Program to the
Treasurer of Eaton Vance Corp.
4. Amount Available for Loans. The aggregate amount of loans under the
Program and under the Company's 1997, 1995 and 1984 Executive Loan Programs,
which may be outstanding at any one time, shall not exceed $10,000,000. All
loans under the Program must be made on or before October 31, 2005.
5. Terms of Notes. Each loan made under the Program shall be evidenced
by a promissory note executed and delivered by the Participant to Eaton Vance
Management (the "Note"). Each Note shall be subject to the following terms and
conditions:
(a) The participant shall be personally liable on the Note.
(b) The maximum term to maturity of the Note shall be seven years;
provided, however, that the Note shall become immediately due and
payable as of the date a Participant ceases to be employed by the
Company for any reason other than age, disability or death.
<PAGE>
32
EXHIBIT 10.21 (CONTINUED)
(c) Each Note shall provide for the payment of interest at such annual
rate as may be set by the Committee, which rate shall not be less
than that necessary to avoid the loan being characterized as either
(i) carrying "unstated interest" within the meaning of ss.483 of
the Internal Revenue Code of 1986, as amended (the "Code") in the
case of loans the proceeds of which are used to acquire shares of
Eaton Vance Stock from the Company or (ii) a "below-market loan"
within the meaning of ss.7872 of the Code in all other cases.
(d) The Committee, in its discretion, may require that amounts payable
with respect to the Note be secured by collateral of such nature
and of such value as the Committee determines. Where the purpose of
the loan is to finance the purchase of Eaton Vance Stock, and where
the Note is secured, all or in part, by "margin securities" as
defined in Regulation G promulgated by the Board of Governors of
the Federal Reserve System, the Note shall contain such further
terms and conditions as are required by said Regulation G.
6. Effective Date. The effective date of the revised Program is October
13, 1999, the date on which it was approved by the Board.
<PAGE>
33
EXHIBIT 10.22
EATON VANCE CORP.
1999 RESTRICTED STOCK PLAN
1. Definitions. As used in this Eaton Vance Corp. 1999 Restricted Stock
Plan the following terms shall have the following meaning:
Affiliate means any corporation, partnership, limited liability
company, business trust or other entity controlling, controlled by or under
common control with the Company.
Award means any grant or sale pursuant to the Plan of Restricted Stock.
Award Agreement means an agreement between the Company and the
recipient of an Award, setting forth the terms and conditions of the Award.
Board means the Company's Board of Directors.
Code means the Internal Revenue Code of 1986, as amended from time to
time. References to any provision of the Code shall be deemed to include
successor provisions and regulations and other guidance issued thereunder.
Committee means the Compensation Committee of the Board, or such other
Board committee as may be appointed by the Board to administer the Plan pursuant
to Section 5. The Committee shall consist solely of two or more Directors of the
Company.
Company means Eaton Vance Corp., a Maryland corporation, or any
successor corporation.
Exchange Act means the Securities Exchange Act of 1934, as amended
from time to time. References to any provision of the Exchange Act shall be
deemed to include successor provisions thereto and regulations and other
guidance issued thereunder.
Grant Date means the date on which an Award is granted.
Market Value means the closing price on the New York Stock Exchange
for the Shares for any date.
Participant means any recipient of an Award.
Plan means this 1999 Restricted Stock Plan, as amended or restated
from time to time.
Qualified Performance-Based Award means an Award which the Committee
shall have designated at grant as intended to provide "performance-based
compensation" within the meaning of Code Section 162(m) or which, although not
so designated, the Committee believes provides "performance-based compensation"
as so defined and was granted to a person who is or the Committee determines is
reasonably likely to become a "covered employee" within the meaning of Code
Section 162(m).
<PAGE>
34
EXHIBIT 10.22 (CONTINUED)
Qualified Member means a member of the Committee who is a "non-employee
director" within the meaning of Rule 16b-3(b)(3) and an "outside director"
within the meaning of Treasury Regulation 1.162-27(e)(3) under Code Section
162(m).
Restricted Stock means a grant or sale of Shares to a Participant
pursuant to this Plan which Shares are subject to a Risk of Forfeiture.
Restriction Period means the period of time during which any grant or
sale of Restricted Stock, or portion thereof, remains subject to a Risk of
Forfeiture, as described in Section 8(d) and the applicable Award Agreement.
Risk of Forfeiture means a limitation on the right of the Participant
to retain an Award of Shares, including a right in the Company to reacquire the
Shares at less than their then Market Value, arising because of the occurrence
or non-occurrence of specified events or conditions.
Rule 16b-3 means Rule 16b-3, as from time to time in effect and
applicable to the Plan and any Participant, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
Shares means shares of Non-Voting Common Stock of the Company or such
other securities as may be substituted or resubstituted therefor pursuant to
Section 4.
2. Purpose. The purpose of the Plan is to advance the interests of the
Company by strengthening the ability of the Company and its Affiliates to
attract, retain and motivate key employees by providing them with an opportunity
to purchase Shares and thus participate in the ownership of the Company,
including the opportunity to share in any appreciation in the value of such
Shares. It is intended that the Plan will strengthen the mutuality of interest
between such persons and the stockholders of the Company.
3. Effective Date. The Plan is effective on October 13, 1999, the date it
was adopted by the Board, but subject to its eventual approval by the voting
stockholders of the Company. Awards granted prior to receipt of stockholder
approval are expressly conditioned upon voting stockholder approval, and shall
be void ab initio in the event such approval is not obtained within twelve (12)
months of October 13, 1999.
4. Stock Subject to the Plan; Adjustments.
(a) Shares Reserved. Subject to adjustment as hereinafter provided, the
total number of Shares reserved for issuance in connection with Awards under the
Plan shall be 500,000. No Award may be granted if the number of Shares to which
such Award relates, when added to the number of Shares previously issued under
the Plan, exceeds the number of Shares reserved under this Section 4(a). Shares
issued under the Plan shall be counted against this limit in the manner
specified in Section 4(b).
<PAGE>
35
EXHIBIT 10.22 (CONTINUED)
(b) Manner of Counting Shares. If any Shares subject to an Award are
forfeited, canceled, exchanged, or surrendered or such Award is settled in cash
or otherwise terminates without the Participant's retention of the Shares
covered by the Award, including (i) the number of Shares withheld in payment of
any tax obligation relating to the grant of such Award and (ii) the number of
Shares equal to the number surrendered in payment of any tax obligation relating
to the lapse of the Restriction Period applicable to an Award, such number of
Shares will again be available for Awards under the Plan. The Committee may make
determinations and adopt regulations for the counting of Shares relating to any
Award to ensure appropriate counting, avoid double counting (in the case of a
substitute Award), and provide for adjustments in any case in which the number
of Shares actually distributed differs from the number of Shares previously
counted in connection with such Award.
(c) Type of Shares Distributable. Any Shares of Restricted Stock
delivered may consist, in whole or in part, of authorized and unissued Shares or
Shares reacquired by the Company through purchase in the open market or in
private transactions.
(d) Adjustments. In the event that the Committee shall determine that
any dividend or other distribution (whether in the form of cash, Shares, or
other property) which is unusual and non-recurring, or any recapitalization,
stock split, reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase or share exchange, or other similar corporate
transaction or event affects the Shares, then the Committee shall make such
equitable changes or adjustments as it deems appropriate and, in such manner as
it may deem equitable, adjust (i) any or all of the number and kind of Shares
which may thereafter be issued in connection with Awards and (ii) where the Risk
of Forfeiture applicable to any then outstanding Restricted Stock is a right to
repurchase such Restricted Stock, the price at which the Company may repurchase
such Restricted Stock. In addition, the Committee is authorized to make
adjustments in the terms and conditions of, and any criteria and performance
objectives or goals included in, Awards in recognition of unusual or
non-recurring events (including events described in the preceding sentence, as
well as acquisitions and dispositions of assets or all or part of businesses)
affecting the Company or any Affiliate or any business unit, or the financial
statements thereof, or in response to changes in applicable laws, regulations,
accounting principles, tax rates and regulations, or business conditions or in
view of the Committee's assessment of the business strategy of the Company, an
Affiliate, or business unit thereof, performance of comparable organizations,
economic and business conditions, personal performance of a Participant, and any
other circumstances deemed relevant; provided that, unless otherwise determined
by the Committee, no such adjustment shall be made in respect of a Qualified
Performance-Based Award if and to the extent that such adjustment would cause
such Qualified Performance-Based Award to provide other than "performance-based
compensation" within the meaning of Code Section 162(m).
5. Administration.
(a) Authority of the Committee. The Plan shall be administered by the
Committee. The Committee shall have full and final authority to take the
following actions, in each case subject to and consistent with the provisions of
the Plan;
(i) to select key employees of the Company or any of its Affiliates
(including directors who are such employees) to whom Awards may be granted;
(ii) to determine the number of Shares of Restricted Stock to be
granted to key employees, the terms and conditions of any Award granted
(including the Restriction Period and the conditions relating to transferability
and the applicable Risk of Forfeiture, and waivers or accelerations thereof,
based in each case on such considerations as the Committee shall determine), and
all other matters to be determined in connection with any Award granted to a key
employee; Exhibit 10.22 (continued)
(iii) to determine the form, terms and conditions of each Award
Agreement;
<PAGE>
36
EXHIBIT 10.22 (CONTINUED)
(iv) to adopt, amend, suspend, waive, and rescind such rules and
regulations and appoint such agents as the Committee may deem necessary or
advisable to administer the Plan;
(v) to correct any defect or supply any omission or reconcile any
inconsistency in the Plan and to construe and interpret the Plan and any Award,
rules and regulations, Award Agreement, or other agreement or instrument
hereunder; and
(vi) to make all other decisions and determinations as may be
required under the terms of the plan or as the Committee may deem necessary or
advisable for the administration of the Plan.
Other provisions of the Plan notwithstanding, the Board may perform any function
of the Committee under the Plan, including for the purpose of ensuring that
transactions under the Plan by Participants who are then subject to Section 16
of the Exchange Act in respect of the Company are exempt under Rule 16b-3. In
any case in which the Board is performing a function of the Committee under the
Plan, each reference to the Committee herein shall be deemed to refer to the
Board, except where the context otherwise requires.
(b) Manner of Exercise of Committee Authority. At any time that a
member of the Committee is not a Qualified Member, any action of the Committee
relating to an Award to be granted to a key employee who is then subject to
Section 16 of the Exchange Act in respect of the Company, or relating to a
Qualified Performance-Based Award, may be taken either (i) by a subcommittee
composed solely of two or more Qualified Members, or (ii) by the Committee but
with each such member who is not a Qualified Member abstaining or recusing
himself or herself from such action, provided that, upon such abstention or
recusal, the Committee remains composed solely of two or more Qualified Members.
Such action, authorized by such a subcommittee or by the Committee upon the
abstention or recusal of such non-Qualified Member(s), shall be the action of
the Committee for purposes of the Plan. Any action of the Committee with respect
to the Plan shall be final, conclusive, and binding on all persons, including
the Company, Affiliates, Participants, any person claiming any rights under the
Plan from or through any Participant, and stockholders of the Company. The
express grant of any specific power to the Committee, and the taking of any
action by the Committee, shall not be construed as limiting any power or
authority of the Committee. The Committee may delegate to officers or managers
of the Company or any Affiliate the authority, subject to such terms as the
Committee shall determine, to perform administrative functions and such other
functions as the Committee may determine, to the extent permitted under
applicable law and, with respect to any Participant who is then subject to
Section 16 of the Exchange Act in respect of the Company, to the extent
performance of such function will not result in a subsequent transaction failing
to be exempt under Rule 16b-3(d).
(c) Limitation of Liability. Each member of the Committee shall be
entitled in good faith to rely or act upon any report or other information
furnished to him or her by any officer or other employee of the Company or any
Affiliate, the Company's independent certified public accountants, or other
professional retained by the Company to assist in the administration of the
plan. No member of the Committee, nor any officer or employee of the Company
acting on behalf of the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Committee and any officer or employee of the
Company acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action,
determination, or interpretation.
<PAGE>
37
EXHIBIT 10.22 (CONTINUED)
6. Duration of the Plan. This Plan shall terminate ten years from the original
effective date hereof, unless terminated earlier pursuant to Section 12, and no
Awards may be granted thereafter.
7. Authorization and Eligibility. Pursuant and subject to the terms of this
Plan, the Committee may grant from time to time and at any time prior to the
termination of the Plan one or more Awards to any employee of one or more of the
Company and its Affiliates (including any director who is such an employee). No
employee shall have any claim to be granted an Award under the Plan, however,
and there is no obligation for uniformity of treatment of employees. Further, no
employee shall be granted Awards covering more than 100,000 Shares (subject to
adjustment as provided in Section 4(d)) in any fiscal year of the Company.
8. Terms and Conditions Applicable to All Awards.
(a) Purchase Price. Shares of Restricted Stock shall be issued under
the Plan for such consideration, in cash, other property or services, as is
determined by the Committee.
(b) Issuance of Certificates. Each Participant receiving an Award of
Restricted Stock, subject to subsection (c) below, shall be issued a stock
certificate in respect of such shares of Restricted Stock. Such certificate
shall be registered in the name of such Participant, and, if applicable, shall
bear an appropriate legend referring to the terms, conditions, and restrictions
applicable to such Award substantially in the following form:
The transferability of this certificate and the shares represented by
this certificate are subject to the terms and conditions (including,
without limitation, the right of Eaton Vance Corp. to repurchase the
shares) of the Eaton Vance Corp. 1999 Restricted Stock Plan and an
Award Agreement entered into by the registered owner and Eaton Vance
Corp. Copies of such Plan and Agreement are on file in the offices of
Eaton Vance Corp.
(c) Escrow of Shares. The Committee may require that the stock
certificates evidencing shares of Restricted Stock be held in custody by a
designated escrow agent (which may but need not be the Company) until the
restrictions thereon shall have lapsed, and that the Participant deliver a stock
power, endorsed in blank, relating to the Shares covered by such Award.
(d) Restrictions and Restriction Period. During the period or periods
established by the Committee and set forth in the Award Agreement, i.e., the
Restriction Period, each Award of Restricted Stock shall be subject to
limitations on transferability and a Risk of Forfeiture (which may take the form
of a right of the Company to repurchase the Restricted Stock for such
consideration, if any, as the Committee shall have determined at grant) arising
on the basis of such conditions related to the continuation of employment or the
attainment of performance goals or otherwise as the Committee may determine. Any
such Risk of Forfeiture may be waived, or the Restriction Period shortened, at
any time by the Committee on such basis as it deems appropriate.
(e) Rights Pending Lapse of Risk of Forfeiture. Except as otherwise
provided in the Plan, at all times prior to lapse of the Risk of Forfeiture
applicable to, or forfeiture or repurchase of, an Award of Restricted Stock, the
Participant shall have all of the rights of a stockholder of the Company as to
such Shares, including the right to receive any dividends paid with respect to
the Shares. The Committee, as determined at the time of an Award, may permit or
require the payment of cash dividends to be deferred and, if the Committee so
determines, reinvested in additional Restricted Stock to the extent Shares are
available under Section 4.
<PAGE>
38
EXHIBIT 10.22 (CONTINUED)
(f) Effect of Termination of Employment or Association. Unless
otherwise determined by the Committee at or after grant and subject to the
applicable provisions of the Award Agreement, upon termination of a
Participant's employment or other association with the Company and its
Affiliates for any reason during the Restriction Period, all shares of
Restricted Stock still subject to Risk of Forfeiture shall be forfeited or
subject to repurchase; provided, however, that military or sick leave shall not
be deemed a termination of employment or other association, if it does not
exceed the longer of ninety (90) days or the period during which the absent
Participant's reemployment rights, if any, are guaranteed by statute or by
contract.
(g) Lapse of Restrictions. Subject to Section 11 below (relating to
satisfaction of withholding obligations), if and when the Risk of Forfeiture
expires without a prior forfeiture of the Restricted Stock, the certificates for
such shares shall be delivered to the Participant promptly if not theretofore so
delivered.
(h) Non-Transferability. No Award shall be transferable by the
Participant otherwise than by will or the laws of descent and distribution.
(i) Buyouts. The Committee or its delegate may at any time offer to buy
out any outstanding Award for a payment in cash, Shares or other property based
on such terms and conditions as the Committee shall determine.
9. Awards to Participants Outside the United States. The Committee may
modify the terms of any Award under the Plan granted to a Participant who is, at
the time of grant or during the term of the Award, resident or primarily
employed outside of the United States in any manner deemed by the Committee to
be necessary or appropriate in order that such Award shall conform to laws,
regulations, and customs of the country in which the Participant is then
resident or primarily employed, or so that the value and other benefits of the
Award to the Participant, as affected by foreign tax laws and other restrictions
applicable as a result of the Participant's residence or employment abroad,
shall be comparable to the value of such an Award to a Participant who is
resident or primarily employed in the United States. An Award may be modified
under this Section 9 in a manner that is inconsistent with the express terms of
the Plan, so long as such modifications will not contravene any applicable law
or regulation.
10. Additional Requirements of Qualified Performance-Based Awards. In
addition to or in lieu of a Risk of Forfeiture based on the provisions of
Section 8(d) above, the retention of any Qualified Performance-Based Award shall
be contingent upon achievement of a pre-established performance goal or goals
and other terms set forth in this Section 10.
(a) Performance Goals Generally. The performance goals for such Award
shall include one or more business criteria and may (but need not) include a
targeted level or levels of performance with respect to each such criterion, as
specified by the Committee consistent with this Section 10, which level may also
be expressed in terms of a specified increase or decrease in the particular
criteria compared to a past period. Performance goals shall be objective and
shall otherwise meet the requirements of Code Section 162(m), including the
requirement that the outcome of performance goals be "substantially uncertain"
at the time established. The Committee may determine that such Award shall be
granted upon achievement of any one performance goal or that two or more of the
performance goals must be attained as a condition to vesting or delivery of
Shares or retention or non-forfeiture of such Award. Performance goals may
differ for separate Awards granted to any one Participant or to different
Participants, and may be different for performance periods.
<PAGE>
39
EXHIBIT 10.22 (CONTINUED)
(b) Business Criteria. One or more of the following business criteria
for the Company, on a consolidated basis, and/or for specified subsidiaries,
Affiliates, business units, funds or ventures of the Company (except with
respect to the total stockholder return and earnings per share criteria), shall
be used by the Committee in establishing performance goals for such Award: (1)
earnings per share; (2) revenues; (3) cash flow; (4) cash flow return on
investment; (5) return on assets, return on investment, return on capital, or
return on equity; (6) identification and/or consummation of investment
opportunities or completion of specified projects in accordance with corporate
business plans; (7) operating margin; (8) net income, net operating income,
pretax earnings, pretax earnings before interest and depreciation and
amortization, pretax operating earnings after interest expense and before
incentives and service fees and extraordinary or special items, or operating
earnings; (9) total stockholder return; (10) commissions paid or payable to
certain marketing personnel which are subjected to the Participant's customary
override commissions; (11) any of the above goals as compared to the performance
of a published or special index deemed applicable by the Committee including,
but not limited to, the Standard & Poor's 500 Stock Index or other indexes or
groups of comparable companies referenced in the Company's annual report on Form
10-K in respect to Item 401(l) of Regulation S-K; (12) new exchange fund assets
acquired during a performance period; (13) the value of all financial assets
resulting from an extraordinary acquisition of assets; and (14) the performance
of one or more of the Eaton Vance funds as compared to a peer group or index or
other benchmark deemed applicable by the Committee. The specific performance
goal or goals established by the Committee with respect to such Award or the
terms of the Award Agreement shall be subject to adjustment by the Committee for
any change in law, regulations and interpretations occurring after the grant
date of the Award so as to enable all compensation to a Covered Employee
attributable to the Award to constitute "performance-based compensation" within
the meaning of Code Section 162(m).
(c) Timing For Establishing Performance Goals. Achievement of
performance goals in respect of such Award shall be measured over the applicable
performance period. Performance goals shall be established not later than 90
days after the beginning of any performance period applicable to such Award, or
at such other date as may be required or permitted for "performance-based
compensation" under Code Section 162(m).
(d) Special Definitions. For purposes of this Section: "performance
period" means the period over which an applicable performance goal or goals must
be met; "extraordinary acquisition of assets" means an unusual or nonrecurring
event affecting the Company or any Affiliate, or any business division or unit
or the financial statements of the Company or any Affiliate, involving the
acquisition of new financial assets to be managed or administered for advisory
or other fees by any Affiliate or any business division or unit, such as the
acquisition of investment companies or partnerships (or their assets) previously
managed by other persons, the acquisition of other investment advisory or
management firms (or their assets) or the formation of joint ventures,
partnerships or similar entities with other firms, provided that such fees shall
be based upon such assets and payable to the Affiliate or business division or
unit upon consummation of the transaction (but the formation of new investment
companies or partnerships by the Company or any Affiliate or the acquisition of
new private accounts to be managed by the Company or any Affiliate in the
ordinary course of its business shall not constitute an extraordinary
acquisition of assets); and "new exchange fund assets" means all financial
assets acquired during a performance period resulting from the private offering
of shares or units of one or more exchange funds offered and managed by any
Affiliate or Affiliates of the Company, including all qualifying assets acquired
by an exchange fund during a performance period to ensure the nontaxability of
the exchange of contributed securities for shares or units of the fund (with all
financial assets acquired by an exchange fund during a performance period valued
as at the close of business on the exchange date, using the valuation of such
assets employed by the fund at such date).
<PAGE>
40
EXHIBIT 10.22 (CONTINUED)
11. Withholding Taxes, Delivery of Shares. Each Award, and the Company's
(and any escrow holder's) obligation to deliver Shares at any time at or after
the grant of an Award, shall be subject to the Participant's satisfaction of all
applicable federal, state and local income and employment tax withholding
obligations which may at grant or thereafter from time to time arise. The
Participant may satisfy the obligations by electing (a) to make a cash payment
to the Company, or (b) if authorized by the Committee in the Award Agreement, to
have the Company withhold Shares with a value equal to the minimum amount
required to be withheld, or (c) if authorized by the Committee in the Award
Agreement, to deliver to the Company Shares owned by the Participant for at
least six (6) months with a value equal to the minimum amount required to be
withheld. The value of Shares to be withheld or delivered shall be based on the
Market Value on the date the amount of tax to be withheld is to be determined.
The Participant's election to have Shares withheld for this purpose will be
subject to the following restrictions: (1) the election must be made prior to
the date the amount of withholding tax is to be determined, (2) the election
must be irrevocable, and (3) the election will be subject to the disapproval of
the Committee.
12. Termination or Amendment of Plan. The Board may at any time terminate
the Plan or make such changes in or additions to the Plan as it deems advisable
without further action on the part of the shareholders of the Company, provided
that no such termination or amendment shall adversely affect or impair any then
outstanding Award without the consent of the Participant holding that Award.
13. Change of Control - Automatic Lapse of Restrictions. Notwithstanding
anything to the contrary herein, the Board or the Committee shall include in the
Award Agreement for each Award granted under this Plan the following provision,
and such inclusion may be effected by incorporating this provision by reference
to this Section 13:
This Award shall be fully and immediately vested, and the Shares covered hereby
no longer subject to any restriction or forfeiture, upon the occurrence of a
Change of Control of the Company; provided, however, that if this Award is a
Qualified Performance-Based Award, there shall be no such full vesting unless
and until the earlier of (A) the attainment of the performance goal or goals set
forth in the Award Agreement or (B) when the Participant is no longer a "covered
employee" within the meaning of Code Section 162(m). A "Change of Control" shall
mean:
(a) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 25% or more of either (i) the then
outstanding non-voting common stock of the Company (the "Non-Voting Stock") or
(ii) the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the "Company
Voting Securities"); provided, that any acquisition by (x) the Company or any of
its subsidiaries, or any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its subsidiaries or (y) any Person that is
eligible, pursuant to Rule 13d-1(b) under the Exchange Act, to file a statement
on Schedule 13G with respect to its beneficial ownership of Company Voting
Securities, whether or not such Person shall have filed a statement on Schedule
13G, unless such Person shall have filed a statement on Schedule 13D with
respect to beneficial ownership of 25% or more of the Company Voting Securities,
shall not constitute a Change of Control; and provided, further, that the
provisions of this subsection (a) shall apply whether or not the Company Voting
Securities or the Non-Voting Stock is registered or required to be registered
under the Exchange Act; or
<PAGE>
41
EXHIBIT 10.22 (CONTINUED)
(b) Individuals who, as of the date hereof, constitute the Company's
Board of Directors (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided, that any individual becoming a director
of the Company ("Director") subsequent to the date of the Award whose election
or nomination for election by the Company's shareholders, was approved by at
least a majority of the Directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office is in connection with an actual or threatened election contest relating
to the election of the Directors of the Company (as such terms are used in Rule
14a-11 of the Regulation 14A promulgated under the Exchange Act); or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation (a "Business Combination"), in each case with respect to
which all or substantially all of the individuals and entities who won the
respective beneficial owners of the Non-Voting Stock and of the Company Voting
Securities immediately prior to such Business Combination will not, following
such Business Combination, beneficially own, directly or indirectly, more than
60% of, respectively, the then outstanding non-voting stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors of the corporation or other entity
resulting from the Business Combination in substantially the same proportion as
their ownership immediately prior to such Business Combination of the Non-Voting
Stock and Company Voting Securities, as the case may be; or
(d) Approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company, or (ii) a sale or other disposition
of all or substantially all of the assets of the Company, or (iii) a sale or
disposition of Eaton Vance Management (or any successor thereto) or of all or
substantially all of the assets of Eaton Vance Management (or any successor
thereto), or (iv) an assignment by any direct or indirect investment adviser
subsidiary of the Company of investment advisory agreements pertaining to more
than 50% of the aggregate assets under management of all such subsidiaries of
the Company, in the case of (ii), (iii) or (iv) other than to a corporation or
other entity with respect to which, following such sale or disposition or
assignment, more than 60% of, respectively, the outstanding non-voting stock and
the combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors is then owned beneficially, directly
or indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners of the Non-Voting Stock and Company Voting Securities
immediately prior to such sale, disposition or assignment in substantially the
same proportion as their ownership of the Non-Voting Stock and Company Voting
Securities, as the case may be, immediately prior to such sale, disposition or
assignment.
Notwithstanding the foregoing, the following events shall not cause, or be
deemed to cause, and shall not constitute, or be deemed to constitute, a Change
of Control:
(1) The acquisition, holding or disposition of Company Voting
Securities deposited under the Voting Trust Agreement dated as of October 30,
1997 or of the voting trust receipts issued therefor, or any change in the
persons who are voting trustees thereunder, or the acquisition, holding or
disposition of Company Voting Securities deposited under any subsequent
replacement voting trust agreement or of the voting trust receipts issued
therefor, or any change in the persons who are voting trustees under any such
subsequent replacement voting trust agreement; provided, that any such
acquisition, disposition or change shall have resulted solely by reason of the
death, incapacity, retirement, resignation, election or replacement of one or
more voting trustees.
<PAGE>
42
EXHIBIT 10.22 (CONTINUED)
(2) Any termination or expiration of a voting trust agreement under
which Company Voting Securities have been deposited or the withdrawal therefrom
of any Company Voting Securities deposited thereunder, if all Company Voting
Securities and/or the voting trust receipts issued therefor continue to be held
thereafter by the same persons in the same amounts, or if contemporaneously
there shall be a Business Combination or change in the capitalization of the
Company as described in clause (3) below.
(3) A Business Combination or change in the capitalization of the
Company pursuant to which the holders of the Non-Voting Stock of the Company
become holders of voting securities of the Company or of the corporation or
other entity resulting from such Business Combination, in substantially the same
proportion as their ownership of Non-Voting Stock immediately prior to such
Business Combination or change in capitalization.
14. General Provisions.
(a) Compliance with Legal and Exchange Requirements. The Plan, the
granting of Awards thereunder, and the other obligations of the Company under
the Plan and any Award Agreement, shall be subject to all applicable federal and
state laws, rules and regulations, and to such approvals by any regulatory or
governmental agency as may be required. The Company, in its discretion, may
postpone the issuance or delivery of Shares under any Award until completion of
such stock exchange listing or registration or qualification of such Shares or
other required action under any state, federal or foreign law, rule or
regulation as the Company may consider appropriate, and may require any
Participant to make such representations and furnish such information as it may
consider appropriate in connection with the issuance or delivery of Shares in
compliance with applicable laws, rules and regulations.
(b) Compliance with Code Section 162(m) and Rule 16b-3. If any
provision of the Plan or any Award Agreement relating to a Qualified
Performance-Based Award or to a person subject to Section 16 of the Exchange Act
does not comply or is inconsistent with the requirements of Code Section 162(m)
or Rule l6b-3, such provision shall be construed or deemed to be amended or to
be null and void to the extent necessary to conform to such requirements. The
foregoing shall not apply in the event of any noncompliance or inconsistency
between a provision of an Award Agreement relating to a Qualified
Performance-Based Award and the requirements of Code Section 162(m) if the Award
Agreement expressly so provides.
(c) No Right to Continued Employment. Neither the Plan nor any action
taken thereunder shall be construed as giving any employee the right to be
retained in the employ of the Company or any of its Affiliates, nor shall it
interfere in any way with the right of the Company or any of its Affiliates to
terminate any employee's employment at any time.
(d) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the voting stockholders of the Company for approval
shall be construed as creating any limitations on the power of the Board to
adopt other incentive arrangements as it may deem desirable, including the
granting of restricted stock, stock options and other awards otherwise than
under the Plan, and such arrangements may be either applicable generally or only
in specific cases.
(e) Governing Law. The validity, construction, and effect of the Plan,
any rules and regulations relating to the Plan, and any Award Agreement shall be
determined in accordance with the laws of the Commonwealth of Massachusetts,
without giving effect to principles of conflicts of laws, and applicable federal
law.
<PAGE>
43
E A T O N V A N C E C O R P .
1999 Annual Report
[Graphic Omitted]
<PAGE>
44
Eaton Vance Corp.
- -----------------
Eaton Vance Corp. is the investment advisor and distributor of over 65 mutual
funds. The Company also manages investments for approvimately 800 individual and
institutional clients.
Eaton Vance Corp. was formed by the 1979 merger of two Boston-based investment
firms: Eaton & Howard, founded in 1924 and Vance, Sanders & Company, founded in
1934.
About the Cover
- ---------------
Pictured is Boston's historic waterfront, the location of Eaton Vance's new
headquarters. The Eaton Vance Building is directly in front of the renowned
Custom Hours Tower, the obelisk-shaped building right of center.
Financial Highlights
- --------------------
(in billions of dollars) 1999 1998
- ----------------------------------------------------------------------------
Assets Under Management $ 40.9 $ 28.4
Fund Sales 12.8 8.4
(in millions of dollars)
- ----------------------------------------------------------------------------
Revenue $349.0 $250.0
Net Income 15.8 30.5
Shareholders' Equity 194.3 211.8
(in dollars)
- ----------------------------------------------------------------------------
Per Common Share
Net Income
Basic $ 1.46* $ 0.84
Diluted 1.41* 0.81
Shareholders' Equity 5.51 5.94
Dividends 0.32 0.26
* Before cumulative effect of change in accounting principle.
Total Assets Under Management
10 - year CAGR:19%
(in billions)
1990 7.3
1991 9.4
1992 11.3
1993 15.4
1994 15.0
1995 16.0
1996 17.3
1997 21.3
1998 28.4
1999 40.9
Dividends Per Share
10 - year CAGR: 20%
1990 $0.06
1991 0.07
1992 0.1
1993 0.12
1994 0.15
1995 0.16
1996 0.18
1997 0.21
1998 0.26
1999 0.32
1
<PAGE>
45
To Shareholders
- ---------------
[Photo of James B. Hawkes]
James B. Hawkes
I am pleased to report that 1999 was a year of outstanding achievement for Eaton
Vance, with numerous records set. Assets under management increased 44 percent
to $40.9 billion, from $28.4 billion in fiscal 1998. Gross fund sales grew by 52
percent to $12.8 billion, and net sales increased by 61 percent to $9.0 billion.
Revenues increased by 40 percent to $349.0 million, and earnings per share,
before a cumulative effect of a change in accounting principle, grew 74 percent,
from $0.81 per diluted share in fiscal 1998 to $1.41 per diluted share in fiscal
1999.
[Callout]
According to Strategic
Insight, Eaton Vance rose to
the 25th largest Fund Manager
among approximately 600 asset
management firms.
Equity Fund Assets
(in billions)
1995 1.6
1996 3.0
1997 5.2
1998 9.7
1999 18.0
Among non-proprietary fund sponsors, Eaton Vance was one of a small number of
firms to experience strong net inflows. For example, data compiled by Goldman
Sachs ranked the Company fourth highest in the mutual fund industry in net fund
cash flows for the 12 months ended July 1999. As a result of strong fund cash
flows, the Company continued to gain market share. According to Strategic
Insight, in June 1999, Eaton Vance was the 25th largest fund manager out of
approximately 600 asset management firms, moving up from the 37th largest in
September 1997.
Eaton Vance's equity assets have grown dramatically, rising six-fold over the
past three years, from $3.0 billion to $18.0 billion, constituting 44 percent
of total assets under management at year end. As a result, the Company has
achieved a balanced mix between equity, fixed-income, and floating-rate income
funds and is well positioned for continued growth in all major asset sectors of
the fund industry.
In addition to strong equity asset growth, assets of floating-rate and
fixed-rate income funds increased significantly. In the floating-rate category,
Eaton Vance has been a market leader in bank loan funds since 1989, when we
introduced Eaton Vance Prime Rate Reserves as one of the pioneer funds in a new
asset class. The Company now offers nine different bank loan investment
alternatives, sold both onshore and offshore. A broad product family and 10-year
record of outstanding investment performance supported bank loan fund asset
growth in fiscal 1999 to $10.0 billion, an increase of 62 percent from the prior
year. We also made great progress in taxable fixed-income assets, where
outstanding investment performance and focused marketing facilitated a 33
percent increase in assets to $2.2 billion.
[Callout]
Eaton Vance's equity assets
have grown dramatically,
rising six-fold over the past
three years, from $3.0 billion
to $18.0 billion, constituting
44 percent of total assets
under management.
2
1999 Assets Under Management
$40.9 Billion
Equity 44%
Fixed Income 31
Floating-Rate Income 25
1996 Assets Under Management
$17.3 Billion
Fixed Income 60%
Equity 24
Floating-Rate Income 16
Earnings per share comparisons for 1999 and 1998 are distorted by the
inconsistent accounting treatment of deferred commission assets in those two
years. A 1998 Financial Accounting Standards Board (FASB) staff announcement,
effective July 23, 1998, required expensing sales commissions for the
distribution of shares of certain types of funds that had previously been
capitalized and amortized over future years. This accounting change had the
effect of reducing fourth quarter 1998 and first half 1999 net income by $0.47
per diluted share and $0.83 per diluted share, respectively. The Company was
also required to take a one-time $36.6 million charge for the cumulative effect
of a change in accounting principle in the first quarter of 1999, to write off
deferred commission assets on the Company's balance sheet as of November 1, 1998
related to amounts deferred prior to July 23, 1998, for the affected funds. In
May 1999, the Company was able to resume capitalizing sales commissions for the
Eaton Vance's bank loan interval funds because they were restructured to include
12b-1 equivalent distribution plans. The Company's cash flow was unaffected by
the accounting changes. We are pleased to have most of the confusion over
reported earnings behind us.
[Callout]
In fiscal 1999, Eaton Vance's
stock price increased by 53
percent, and assets under
management grew 44 percent to
$40.9 billion.
3
On October 13, 1999, the Company raised its dividend 27 percent to an effective
annual rate of $0.38 per share. Eaton Vance has increased its dividend in each
of the past 19 years, achieving an average annual growth rate of 20 percent.
Eaton Vance's stock price rose 53 percent in fiscal 1999, a rate of growth far
outstripping the S&P 500 and other publicly traded asset management company
stocks. A recent Putnam, Lovell, deGuardiola & Thornton Equity Research report
noted, "Eaton Vance is by far and away the best performing asset management
stock of the year... as its consistent performance in well-defined niches (bank
loan funds and tax-efficient investments) has worked in its favor."
[Callout]
On October 13, 1999, the
Company raised its dividend 27
percent to an effective annual
rate of $0.38 per share. Eaton
Vance has increased its
dividend in each of the past
19 years, at an annual growth
rate of 20 percent.
On May 3, 1999, the Company moved into The Eaton Vance Building, our new Boston
headquarters at 255 State Street. The move allowed Eaton Vance to consolidate
operations from three buildings into one newly renovated, modern and efficient
leased facility. With the sale of the buildings at 24 Federal Street and 79 Milk
Street that housed our former offices, and the sale of a shopping mall and
office property in Troy, New York, we have nearly completed our objective of
exiting the real estate business. We expect to sell our one remaining property,
a 103,000 square foot warehouse located in Springfield, Massachusetts, in fiscal
2000. When coupled with the Company's exit from gold operations in fiscal 1998,
Eaton Vance is very close to achieving its goal of concentrating its efforts
exclusively on asset management.
[Callout]
On May 3, the Company
consolidated operations from
three buildings into one at
its new headquarters at 255
State Street.
Gross Fund Sales
(in billions)
1996 2.6
1997 4.2
1998 8.4
1999 12.8
Net Fund Sales
(in billions)
1996 0.5
1997 0.5
1998 5.6
1999 9.0
4
- ------------------------------
Stock Price Performance
5-Year Average Return
Eaton Vance Corp. 41.53%
S&P 500 Stock Index 26.02%
S&P 400 Midcap Index 19.51%
Source: Bloomberg
The above returns are calculated
on an October-to-October basis.
- ------------------------------
Eaton Vance ended fiscal 1999 with $77.4 million of cash and equivalents and
short-term investments, compared to $96.4 million at the beginning of the year.
During the year Eaton Vance paid $218.6 million in sales commissions associated
with the strong sales of our equity, bank loan and high-yield bond funds and
used $34.6 million to repurchase 1,254,000 shares of the Company's common stock.
We used $11.8 million of cash for leasehold improvements and equipment purchases
for the new headquarters building. Real estate sales provided $25.2 million of
cash. Because of the Company's strong operating and investing cash flow, we were
able to finance all of the sales commissions, stock repurchases, and capital
expenditures from internal resources.
[Callout]
In a year when overall mutual
fund industry cash flows were
down, Eaton Vance continued to
grow sales, assets under
management, and market share.
In a year when overall mutual fund industry cash flows were down, Eaton Vance
distinguished itself by continuing to grow sales, assets under management, and
market share. These accomplishments are the result of a capable, motivated and
energetic team working to achieve well-defined business goals. Eaton Vance's
employees are by far our most valuable asset, and, unlike many of our
competitors, we had no significant turnover of key employees.
<PAGE>
46
On December 1, 1999, Eaton Vance celebrated the 75th anniversary of the founding
of Eaton & Howard, one of the predecessor firms that became Eaton Vance. One of
the nation's oldest investment management firms, Eaton Vance has a distinguished
history as an innovator and leader in the investment management industry. As we
celebrate Eaton Vance's 75th anniversary year in fiscal 2000, we see many
opportunities for continued innovation, industry leadership and corporate
growth.
/s/ James B. Hawkes
James B. Hawkes
Chairman of the Board
President and Chief Executive Officer
5
<PAGE>
47
Fiscal 1999 Highlights
- ----------------------
Private Placement Assets Raised
(in billions)
1996 0.17
1997 1.12
1998 2.40
1999 5.02
Exchange Listed
Closed -end Fund Assets Raised
(in billions)
1998 0.31
1999 1.23
o Eaton Vance's stock appreciated 53 percent in fiscal 1999, from $22 3/8 at
October 31, 1998 to $34 3/16 at October 31, 1999.
o Assets under management increased 44 percent to $40.9 billion from $28.4
billion.
o Equity fund assets grew by 86 percent to $18.0 billion and now represent 44
percent of total assets under management.
o Gross fund sales reached a record high $12.8 billion, exceeding 1998 sales of
$8.4 billion by 52 percent. Net sales were $9.0 billion compared to $5.6
billion in 1998, an increase of 61 percent.
o Eaton Vance's dividend was increased by 27 percent to an effective annual rate
of $0.38 per share. The Company has increased its dividend in each of the past
19 years.
o In a year when overall mutual fund industry cash flows were down, Eaton Vance
continued to grow sales, assets under management, and market share.
o Taxable fixed-income assets grew 33 percent to $2.2 billion.
o Assets in the Company's bank loan funds grew to $10.0 billion in fiscal 1999,
an increase of 62 percent.
o Among non-proprietary fund sponsors, Eaton Vance ranked fourth highest in net
fund cash flows for the 12 months ended July 1999.
o According to Strategic Insight, in June 1999 Eaton Vance was the 25th largest
fund manager out of approximately 600 asset management firms, rising from 37th
largest in 1997.
o The Company raised $4.7 billion in equity private placements and $1.1 billion
from nine municipal closed-end funds.
o In May, the Company was able to resume capitalizing sales commissions for its
bank loan interval funds.
o The Company was consolidated into one leased facility, The Eaton Vance
Building, at 255 State Street, Boston.
o The Company sold four properties, nearly completing its exit from the real
estate business.
6
<PAGE>
48
Eaton Vance Corp. trades on the New York Stock
Exchange under the symbol "EV."
Price and Dividend Information
High Low Dividend
Price Price Per Share
- ------------------------------------------------------------------------
Quarter Ended January 31, 1998 $19.19 $15.75 $0.060
April 30, 1998 25.09 18.03 0.060
July 31, 1998 24.81 21.75 0.060
October 31, 1998 23.38 17.63 0.075
Quarter Ended January 31, 1999 $24.94 $19.25 $0.075
April 30, 1999 24.00 18.69 0.075
July 31, 1999 40.00 22.88 0.075
October 31, 1999 35.63 27.38 0.095
Quarterly High and Low Stock Prices
Adjusted for two-for-one stock splits November 11, 1992, May 15, 1997, August
14, 1998, and November 10, 1995 spin-off of Investors Financial Services Corp.
Year Q High Low
1989 1 2.38 2.05
2 2.88 2.38
3 2.54 2.28
4 2.9 2.28
1990 1 2.93 2.74
2 2.90 2.28
3 2.38 2.2
4 2.28 1.58
1991 1 1.52 1.52
2 2.80 1.89
3 2.62 1.97
4 3.01 2.38
1992 1 3.88 2.85
2 3.96 3.31
3 3.66 3.21
4 4.92 3.42
1993 1 7.98 4.25
2 7.77 6.01
3 7.51 6.37
4 8.55 7.1
1994 1 7.77 6.32
2 7.77 6.06
3 6.37 5.49
4 7.10 5.28
1995 1 6.68 5.49
2 6.79 5.85
3 7.07 6.68
4 8.13 6.48
1996 1 8.06 6.5
2 8.69 7.63
3 10.06 7.5
4 11.16 9.13
1997 1 12.44 10.44
2 12.19 10.44
3 15.56 11.00
4 18.91 13.22
1998 1 19.19 15.75
2 25.09 18.03
3 24.81 21.75
4 23.38 17.63
1999 1 24.94 19.25
2 24.00 18.69
3 40.00 22.88
4 35.63 27.38
7
<PAGE>
49
Investment Management
- ---------------------
[Callout]
Equity fund assets grew 86
percent to $18.0 billion, led
by seven closings of a private
equity fund and strong retail
sales of the Company's three
tax-managed growth funds.
<TABLE>
<CAPTION>
Assets Under
Management Non-Taxable Taxable
by Type Fixed Income Fixed Income Bank Loans Money Market Counsel Equities
At Fiscal
Year End (in
billions)
<S> <C> <C> <C> <C> <C> <C>
1992 4.6 1.5 1.1 0.4 2.1 1.6
1993 8.4 1.6 0.8 0.2 2.2 2.2
1994 9.0 1.3 0.6 0.2 1.6 2.3
1995 8.9 1.3 1.4 0.2 1.8 2.4
1996 8.2 1.3 2.8 0.2 1.7 3.1
1997 7.5 2.1 3.9 0.2 2.4 5.2
1998 7.6 2.2 6.2 0.2 2.5 9.7
1999 7.4 2.5 10.0 0.2 2.8 18.0
</TABLE>
Assets Under Management Increased 44 Percent in Fiscal 1999 to $40.9 Billion
Eaton Vance increased assets under management at a record pace during fiscal
1999. Assets under management grew to $40.9 billion from $28.4 billion, a 44
percent increase. Equity fund assets grew 86 percent to $18.0 billion, led by
seven successful closings of a private equity fund and strong retail sales of
the Company's popular family of tax-managed growth funds. Equity assets
represented 44 percent of total assets under management in 1999, compared to 39
percent in 1998 and 30 percent in 1997. Bank loan fund assets increased 62
percent to $10 billion, propelling Eaton Vance to the rank of second largest
manager of these funds. Taxable fixed-income fund assets grew 33 percent to $2.2
billion, and municipal bond fund assets, which have been in net redemptions
industry-wide, ended the fiscal year at $7.4 billion, down only 2 percent from
the beginning of the year. Eaton Vance ranked 25th out of approximately 600
firms in long-term mutual fund assets under management, according to data
compiled by fund industry consultant Strategic Insight. The Company's share of
market has increased substantially from the 37th ranking in 1997.
Eaton Vance is recognized as having a well-diversified family of mutual funds.
The Company's expertise and large asset base in tax-efficient equity funds, in
municipal bond funds, and in floating-rate bank loan funds allow it to provide
investment opportunities to taxable investors with varied investment objectives
and in any market environment. In 1999, a year characterized by the volatility
of the equity markets and the uncertainties caused by the apparent high
valuations of a limited number of technology and Internet company stocks, Eaton
Vance's long-term, tax-efficient approach to investing was well received. Flows
into the Company's family of tax-managed growth funds were not significantly
affected by the slower industry-wide flows into equity funds. At the same time,
conservative investors responded well to the attractive yields and relatively
low volatility of the Company's floating-rate bank loan funds.
8
[Callout]
Gross fund sales, excluding
money market funds and
reinvested dividends, grew 52
percent during fiscal 1999 to
$12.8 billion. Net sales, at
$9.0 billion, were 61 percent
greater than in fiscal 1998.
Sales of Eaton Vance funds in fiscal 1999, excluding money market funds and
reinvested dividends, grew 52 percent to $12.8 billion. Net of redemptions, fund
sales of $9.0 billion were 61 percent greater than in fiscal 1998. Equity and
bank loan funds led the increase. Goldman Sachs and Strategic Insight both
ranked Eaton Vance in the top five fund sponsors in terms of net sales in 1999.
During the year we completed a private placement of a fund for high net worth
investors. This fund, the largest of its type ever offered by Eaton Vance, added
$4.7 billion to our assets under management.
[Callout]
Eaton Vance is the undisputed
leader in tax-efficient
investing, with $5.6 billion
in tax-managed equity assets
at fiscal year end and $7.4
billion in municipal bond fund
assets.
Eaton Vance Is the Undisputed Leader in Tax-Managed Funds
Eaton Vance ended fiscal 1999 with $5.6 billion of tax-managed equity assets
under management in open-end mutual funds. The Wall Street Journal reported in
June 1999 that the entire fund industry had $17.4 billion in tax-managed equity
assets. The Company's commanding position in tax-efficient equity funds plus its
$7.4 billion under management in 55 municipal bond funds make Eaton Vance the
undisputed leader in tax-efficient investing. Tax-efficient investing addresses
roughly 60 percent of mutual fund assets, the balance of which is invested
through tax-qualified retirements plans, such as IRAs and 401(k)s. The investor
who is not investing through a tax-qualified plan is concerned with taxes and
cares about after-tax returns, the focus of our tax-managed funds. Eaton Vance
has created a comprehensive family of equity and municipal bond funds that are
managed and marketed as "Mutual Funds for People Who Pay Taxes." As the U.S.
population ages and investors' wealth grows, more and more people will seek
tax-efficient investment returns. Early in 2000, Eaton Vance plans to introduce
a tax-managed value fund to complement its large-cap growth, international
growth and emerging growth (small/medium cap) tax-managed funds. Eaton Vance
will continue to expand its product line to address this rapidly growing market.
9
[Callout]
In January, the Company
successfully completed initial
public offerings of nine
exchange-listed, closed-end
municipal bond funds and
raised $1.1 billion in assets.
Municipal Bond Funds Weather Difficult Market Conditions
Eaton Vance raised $1.1 billion in nine exchange-listed, closed-end municipal
bond fund public offerings in fiscal 1999. The national municipal income trust
and eight single-state municipal income trusts invest primarily in
investment-grade municipal bonds. The new funds complement the Company's 46
national and single-state open-end funds. In a period of rising interest rates
and lower bond prices, the Company's open-end municipal bond funds experienced
net redemptions during 1999, a trend that was experienced by the mutual fund
industry overall. The addition of assets from our new closed-end municipal bond
funds largely offset these redemptions. Total municipal bond fund assets under
management were $7.4 billion at the end of fiscal 1999.
[Callout]
Assets under management in
bank loan funds grew 62
percent to $10.0 billion in
fiscal 1999, making Eaton
Vance the second largest
provider of funds in this
growing asset class.
Floating-Rate Bank Loan Funds Offer High Returns in Volatile Markets
Eaton Vance significantly strengthened its leadership position in bank loan
funds in fiscal 1999. Assets under management grew 62 percent to $10.0 billion,
making Eaton Vance the second largest provider of funds in this growing asset
class. Having only minimal interest rate risk, these funds have been
particularly popular during volatile equity and bond markets. Eaton Vance began
offering bank loan funds in 1989, and these funds have consistently provided
superior yields, stable asset values and liquidity through quarterly repurchase
programs. During fiscal 1999 we launched two institutional senior loan funds to
make bank loan funds available through a broader group of financial
intermediaries. Sales of continuously-offered and exchange-listed bank loan
funds totaled $4.7 billion in fiscal 1999. Eaton Vance Prime Rate Reserves and
Classic Senior Floating-Rate Funds received 5-star ratings by Morningstar in
fiscal 1999.
10
[Callout]
The Company had its best fund
sales year ever, with strong
growth in traditional broker/
dealer and bank channels and
significant expansion in the
registered investment adviser
and fund supermarket channels.
Expanding Distribution Channels Add to Asset Growth
Eaton Vance continued to strengthen its fund distribution channels during the
year. In addition to strong growth in the traditional broker/dealer and bank
channels, business expanded significantly in the registered investment adviser
and fund supermarket channels. The Company had its best fund sales year ever,
with total fund sales reaching $12.8 billion. Eaton Vance also began to expand
its overseas fund business. The Company recently organized four new funds in
Dublin, Ireland, for distribution in Europe. These funds are currently being
registered for sale in Germany, Italy and Switzerland. The new funds complement
the Medallion Funds that are sold to non-US investors in private transactions
outside of the United States. The Company's international equity funds and
high-yield bond funds are particularly well suited for distribution in Europe.
The Company has also registered several of its funds in Hong Kong for sale in
Southeast Asia.
Fund Sales by Distribution Channel
(Fiscal Year 1999)
National Broker/Dealers 26%
Other 13
Banks 23
Independent Broker/Dealers 27
Regional Broker/Dealers 11
11
Eaton Vance expanded its Internet web page, "www.eatonvance.com," to provide
more mutual fund information to financial advisers and investors. With proper
authorization and security, fund shareholders and their advisers are now able to
review account balances, make additional investments, and execute exchanges over
the Internet.
[Callout]
Fund shareholders and their
advisers are now able to
review account balances, make
additional investments, and
execute exchanges on the
Company's website,
"www.eatonvance.com. "
Eaton Vance has Almost Exited the Real Estate Business
In May 1999, the Company moved into its new Boston headquarters, The Eaton Vance
Building, at 255 State Street. By this move, Eaton Vance consolidated its
operations from three buildings into one newly renovated, modern and efficient
leased facility. The Company sold its two buildings at 24 Federal Street and 79
Milk Street in June 1999 and in April 1999 terminated its lease in a third
building. With the sale of a shopping mall and office property in Troy, New York
in July 1999, the Company nearly completed its objective of exiting the real
estate business. We expect to sell one remaining property, a 103,000 square foot
warehouse in Springfield, Massachusetts, in fiscal 2000.
[Callout]
Eaton Vance expects the
investment management business
to grow faster than the
economy as a whole, and the
Company enters the year 2000
well positioned to help
investors diversify their
holdings as they pursue
long-term investment returns.
Eaton Vance is Positioned for More Growth in 2000 and Beyond
Eaton Vance is entering the year 2000 in a growth industry with a capable and
motivated staff, a balanced product line, excellent investment performance and
financial strength. The broad product mix of equity, fixed income and bank loan
funds is especially important, since business cycles often determine which
investment products will be in demand. The Company is planning to expand its
product line by introducing more investment products and services in fiscal
2000. Eaton Vance is well positioned to offer financial advisers and investors a
variety of investment vehicles that will help them diversify their holdings and
maximize long-term investment returns.
12
<PAGE>
50
<TABLE>
Five Year Financial Summary
- ------------------------------
<CAPTION>
Years Ended October 31,
(in thousands, except per share figures) 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income Statement Data
REVENUE:
Investment adviser and administration fees $198,644 $152,481 $117,540 $100,450 $ 85,393
Distribution income 146,436 91,347 77,276 76,182 77,978
Income from real estate activities 1,931 4,405 4,155 3,597 3,347
Other income 1,939 1,754 1,939 1,760 1,199
- ---------------------------------------------------------------------------------------------------------------------
Total revenue 348,950 249,987 200,910 181,989 167,917
- ---------------------------------------------------------------------------------------------------------------------
EXPENSES:
Compensation of officers and employees 68,535 58,343 48,155 41,420 38,947
Amortization of deferred sales commissions 63,991 64,570 54,464 52,585 50,186
Sales commission expense 71,282 29,965 -- -- --
Other expenses 67,238 48,457 34,386 28,963 31,350
- ---------------------------------------------------------------------------------------------------------------------
Total expenses 271,046 201,335 137,005 122,968 120,483
- ---------------------------------------------------------------------------------------------------------------------
Operating income 77,904 48,652 63,905 59,021 47,434
OTHER INCOME (EXPENSE):
Interest income 3,631 5,609 3,571 3,735 2,641
Interest expense (2,960) (3,818) (3,951) (3,742) (4,702)
Gain (loss) on sale of investments 7,325 2,126 3,561 546 (250)
Equity in net income (loss) of affiliates 10 105 384 1,639 (1,382)
Impairment loss on real estate -- (2,636) -- (1,277) --
- ---------------------------------------------------------------------------------------------------------------------
Income from continuing operations before
income taxes, extraordinary item and cumulative
effect of change in accounting principle 85,910 50,038 67,470 59,922 43,741
Income taxes 33,505 19,515 27,236 24,088 16,773
- ---------------------------------------------------------------------------------------------------------------------
Income from continuing operations before
extraordinary item and cumulative effect of
change in accounting principle 52,405 30,523 40,234 35,834 26,968
Income from discontinued operations,
net of income taxes -- -- -- -- 3,408
Extraordinary gain on early retirement of
debt, net of income taxes -- -- -- 1,590 --
Cumulative effect of change in accounting principle,
net of income taxes (36,607) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 15,798 $ 30,523 $ 40,234 $ 37,424 $ 30,376
- ---------------------------------------------------------------------------------------------------------------------
Earnings per share from continuing operations before
extraordinary item and cumulative effect of
change in accounting principle:
Basic $ 1.46 $ 0.84 $ 1.08 $ 0.95 $ 0.73
- ---------------------------------------------------------------------------------------------------------------------
Diluted $ 1.41 $ 0.81 $ 1.04 $ 0.94 $ 0.73
- ---------------------------------------------------------------------------------------------------------------------
Earnings per share:
Basic $ 0.44 $ 0.84 $ 1.08 $ 0.99 $ 0.82
- ---------------------------------------------------------------------------------------------------------------------
Diluted $ 0.43 $ 0.81 $ 1.04 $ 0.98 $ 0.82
- ---------------------------------------------------------------------------------------------------------------------
Dividends declared, per share $ 0.32 $ 0.26 $ 0.21 $ 0.17 $ 0.16
- ---------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding 35,799 36,290 37,318 37,726 36,846
- ---------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding assuming dilution 37,247 37,757 38,698 38,306 37,154
- ---------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Total assets $358,299 $380,260 $387,375 $360,552 $357,586
Long-term debt $ 28,571 $ 35,714 $ 50,964 $ 54,549 $ 56,102
Shareholders' equity $194,268 $211,809 $226,280 $210,780 $194,520
Shareholders' equity per share $ 5.51 $ 5.94 $ 6.12 $ 5.62 $ 5.21
</TABLE>
13
<PAGE>
51
Management's Discussion and Analysis
- ------------------------------------
General
The Company's principal business is creating, marketing and managing mutual
funds and providing investment management and counseling services to
institutions and individuals. The Company distributes its funds through
third-party broker-dealers, independent financial institutions and investment
advisers.
The Company's revenue is primarily derived from investment adviser,
administration and distribution fees received from the Eaton Vance funds and
adviser fees received from separately managed accounts. Generally, these fees
are based on the net asset value of the investment portfolios managed by the
Company and fluctuate with changes in the total value of the assets under
management. The Company's major expenses are the amortization of deferred sales
commissions and other marketing costs, sales commissions associated with the
offering of closed-end funds, employee compensation, occupancy costs and service
fees.
Results of Operations Fiscal Year 1999
Compared to Fiscal Year 1998
Eaton Vance Corp. reported earnings before the cumulative effect of a change in
accounting principle of $52.4 million or $1.41 per diluted share in 1999
compared to $30.5 million or $0.81 per diluted share in 1998.
In September 1998, the Financial Accounting Standards Board (FASB) staff
addressed the accounting for offering costs incurred in connection with the
distribution of funds when the adviser does not receive both 12b-1 distribution
fees and contingent deferred sales charges and concluded that such offering
costs should be expensed as incurred. Prior to the FASB staff announcement, it
had been the Company's policy to capitalize and amortize these costs, notably
sales commissions paid to brokers, over a period not to exceed five years.
Closed-end fund, bank loan interval fund and private placement sales commissions
paid and capitalized prior to and including the July 23, 1998 effective date of
the FASB staff announcement were written off as a cumulative effect of a change
in accounting principle on November 1, 1998. The cumulative effect of adoption,
net of tax, was $36.6 million or $0.98 per diluted share.
In April of 1999, the bank loan interval funds received shareholder approval and
a Securities and Exchange Commission (SEC) exemptive order permitting them to
implement Rule 12b-1 equivalent distribution plans. With the implementation of
these distribution plans, the SEC permitted the Company to resume the
capitalization and amortization of sales commissions associated with the
distribution of these funds effective May 1, 1999, the beginning of the
Company's third fiscal quarter. For the period November 1, 1999 through April
30, 1999, these commissions totaled $71.3 million and have been recorded in
"Sales commission expense" in the Company's consolidated statement of income for
the fiscal year ended October 31, 1999.
14
Assets under management of $40.9 billion on October 31, 1999 were 44 percent
higher than the $28.4 billion reported a year earlier as a result of net sales
of new fund shares and appreciation of the market value of managed assets. Fund
sales for the year ended October 31, 1999 of $12.8 billion were 52 percent
higher than the $8.4 billion reported a year earlier. This growth can be
primarily attributed to strong sales of the Eaton Vance Tax-Managed Growth Fund,
the Company's bank loan interval funds, a $4.7 billion private placement of a
private equity fund (leverage included), and the offering of nine new closed-end
municipal funds in fiscal 1999. As a result of equity market appreciation,
continued sales growth and private placements, equity fund assets increased to
44 percent of total assets under management on October 31, 1999 from 34 percent
on October 31, 1998, and bank loan interval fund assets increased to 25 percent
of total assets under management on October 31, 1999 from 22 percent on October
31, 1998. Taxable and non-taxable fixed income funds decreased to 24 percent of
total assets under management on October 31, 1999 from 34 percent on October 31,
1998.
The Company reported record revenue of $349.0 million in fiscal 1999 compared to
$250.0 million in fiscal 1998, an increase of 40 percent. Investment adviser and
administration fees increased by 30 percent to $198.6 million in fiscal 1999
from $152.5 million in fiscal 1998 as a result of the 44 percent growth in total
assets under management. The increase was negatively impacted by a reduction in
the investment adviser and administration fees earned on the Company's bank loan
interval funds as a result of the change in fee structure associated with the
implementation of the 12b-1 equivalent distribution plans. Distribution fees
increased by 60 percent to $146.4 million in fiscal 1999 from $91.3 million a
year earlier, primarily as a result of the implementation of the distribution
plans on the bank loan interval funds and overall growth in total
spread-commission assets under management.
Total operating expenses increased 35 percent to $271.0 million in fiscal 1999
from $201.3 million in fiscal 1998. The change in the accounting treatment of
closed-end and bank loan interval fund sales commissions resulted in $71.3
million in sales commission expense in 1999 compared to $30.0 million in fiscal
1998. This increase in sales commission expense represents 59 percent of the net
increase in operating expenses year over year. In the third quarter of fiscal
1999, the Company adjusted the amortization period of certain deferred sales
commission assets in order to better match amortization expense with projected
distribution fee income. This adjustment resulted in an increase in amortization
expense of $10.0 million in fiscal 1999. This increase was offset by a decrease
in amortization resulting from the change in the accounting treatment of
closed-end and bank loan interval fund sales commissions beginning in the third
fiscal quarter.
The increases in both compensation and other expenses reflect the increase in
marketing costs and sales incentives associated with strong mutual fund sales,
an equity fund private placement, and the offering of nine new closed-end
municipal bond funds in fiscal 1999.
15
Interest income decreased 36 percent to $3.6 million in fiscal 1999 from $5.6
million in fiscal 1998. This decrease in interest income corresponds to the
decrease in cash and equivalents and short-term investments year over year. Net
realized gains include the sale of a shopping center and office building located
in Troy, New York, a warehouse located in Colonie, New York, and two office
buildings located in Boston, Massachusetts.
The Company's effective tax rate was 39.0 percent in both fiscal 1999 and 1998.
Results of Operations Fiscal Year 1998
Compared to Fiscal Year 1997
Eaton Vance Corp. reported earnings of $30.5 million or $0.81 per diluted share
in fiscal 1998 compared to $40.2 million or $1.04 per diluted share in fiscal
1997. Fiscal 1998 earnings reflect a change in the accounting treatment of sales
commissions paid in connection with the distribution of the Company's closed-end
and bank loan interval funds. The change in accounting treatment reduced net
income by $17.8 million or $0.47 per diluted share for both the fourth quarter
and year ended October 31, 1998.
In 1998, the Financial Accounting Standards Board staff addressed the accounting
for offering costs incurred in connection with the distribution of funds when
the adviser does not receive both 12b-1 distribution fees and contingent
deferred sales charges and concluded that these offering costs should be
expensed as incurred. For the period July 24, 1998 through October 31, 1998 (the
period following the effective date of the FASB staff announcement), these
offering costs totaled $30.0 million and have been recorded in "Sales commission
expense" in the Company's consolidated statement of income for the fiscal year
ended October 31, 1998.
Assets under management of $28.4 billion on October 31, 1998 were 33 percent
higher than the $21.3 billion reported a year earlier as a result of net sales
of new fund shares and appreciation of the market value of managed assets. Fund
sales for the year ended October 31, 1998 of $8.4 billion were 100 percent
higher than the $4.2 billion reported in fiscal 1997. This growth can be
primarily attributed to strong sales of the Eaton Vance Tax-Managed Growth Fund,
the Company's bank loan interval funds and a $1.8 billion private placement of a
private equity fund. As a result of strong equity markets, continued sales
growth and private placements, equity fund assets increased to 34 percent of
total assets under management on October 31, 1998 from 24 percent on October 31,
1997, and bank loan interval fund assets increased to 22 percent of total assets
under management on October 31, 1998 from 18 percent on October 31, 1997. As a
result of the growth in equity and bank loan interval funds, taxable and
non-taxable fixed income fund assets decreased to 34 percent of total assets
under management on October 31, 1998 from 46 percent a year earlier.
16
The Company reported revenue of $250.0 million in fiscal 1998 compared to $200.9
million in 1997, an increase of 24 percent year over year. Investment adviser
and administration fees increased by 30 percent to $152.5 million in 1998 from
$117.5 million in 1997 as a result of the growth in total assets under
management. Distribution fees increased by 18 percent to $91.3 million in 1998
from $77.3 million in 1997 primarily as a result of the increase in sales and
overall asset growth of the Company's spread-commission domestic equity funds.
Total operating expenses increased by $64.3 million to $201.3 million in fiscal
1998 from $137.0 million in fiscal 1997. The change in the accounting treatment
of closed-end fund offering costs resulted in $30.0 million in sales commission
expense in fiscal 1998, which represents 47 percent of the net increase in
operating expenses year over year. The increases in both compensation and other
expenses reflect the increase in marketing expenses and sales incentives
associated with higher mutual fund sales, an equity fund private placement and
the offering of Eaton Vance Senior Income Trust in October of 1998. Amortization
expense increased by $10.1 million or 19 percent to $64.6 million in 1998
primarily due to the increase in gross sales of the Company's spread-commission
funds.
Interest income increased 56 percent to $5.6 million in 1998 from $3.6 million
in 1997, despite a decrease in cash, cash equivalents and short-term investments
year over year. The increase in interest income reflects a change in the
Company's short-term investment strategy and a shift from investments generating
capital gains to investments generating dividend and interest income. The
pre-tax impairment loss of $2.6 million in fiscal 1998 resulted from a decision
to sell an office building and shopping center in Troy, New York that had a
carrying value in excess of its net realizable value. Net realized gains include
the sale of a shopping center in Goffstown, New Hampshire in 1998.
The decrease in the Company's effective tax rate to 39.0 percent in fiscal 1998
from 40.4 percent in fiscal 1997 reflects favorable state tax developments.
Liquidity and Capital Resources
Cash, cash equivalents and short-term investments aggregated $77.4 million at
October 31, 1999, a decrease of $19.0 million from October 31, 1998.
17
Operating activities generated cash of $22.1 million in fiscal 1999 compared to
$9.9 million in fiscal 1998. The increase in cash provided by operating
activities in fiscal 1999 can be primarily attributed to the increase in net
income earned by the Company and the deferral of income taxes associated with
the payment of capitalized sales commissions. The payment of sales commissions
associated with the distribution of the Company's spread-commission, interval
and closed-end funds continues to be the primary use of cash and totaled $218.6
million in fiscal 1999. These payments were comprised of $71.3 million of sales
commissions related to sales of the Company's closed-end and bank loan interval
funds from November 1, 1998 to April 30, 1999, $114.7 million of capitalized
sales commissions related to fiscal 1999 sales of the Company's open-end funds,
and $32.6 million of capitalized sales commissions related to sales of the
Company's bank loan interval funds from May 1, 1999 to October 31, 1999.
Closed-end and bank loan interval fund sales commissions of $71.3 million paid
prior to April 30, 1999 were expensed as paid and therefore included as a
component of net income in the Company's consolidated statements of income and
cash flows.
Investing activities, consisting primarily of the purchase and sale of
investments, leasehold improvements and real estate, increased cash and cash
equivalents by $53.4 million in fiscal 1999. In connection with its plan to
withdraw from activities not related to the management of financial assets, the
Company sold a shopping center and office building located in Troy, New York, a
warehouse located in Colonie, New York, and two office buildings located in
Boston, Massachusetts, in 1999. The Company anticipates that the sale of the one
remaining real estate property will be completed in fiscal 2000. Other
significant investing activities in fiscal 1999 included the sale of short-term
investments with a fair market value of $50.0 million.
Financing activities for the Company reduced cash and cash equivalents by $52.5
million and $53.6 million in fiscal 1999 and fiscal 1998, respectively.
Financing activities during fiscal 1999 included the repayment of $7.1 million
on the Company's 6.22 percent Senior Note, the repayment of mortgage notes
payable associated with the sale of certain real estate properties, and the
repayment of $12.0 million borrowed under the Company's $50 million senior
unsecured revolving credit facility. In addition, the Company repurchased 1.3
million shares of its non-voting common stock under its authorized repurchase
program for a total of $34.6 million. The Company increased its dividend in the
fourth quarter of 1999 to an effective annual rate of $0.38.
At October 31, 1999, the Company had no borrowings outstanding under its $50
million senior unsecured revolving credit facility.
The Company anticipates that cash flows from operations and available debt will
be sufficient to meet the Company's foreseeable cash requirements and provide
the Company with the financial resources to take advantage of strategic growth
opportunities.
18
Accounting Changes
In June of 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting and
reporting standards requiring that every derivative instrument be recorded on
the balance sheet as either an asset or a liability measured at its fair value.
The Company has not yet determined the effect, if any, of this announcement on
the consolidated financial statements. The Company intends to adopt the
provisions of SFAS No. 133 as amended by SFAS No. 137 in fiscal 2001.
Year 2000
The Company utilizes computer technologies throughout its business to
effectively carry out its day-to-day operations. Computer technologies utilized
by the Company include both information systems in the form of hardware and
software (IT items), as well as embedded technology in the Company's facilities
and equipment (non-IT items). Given its reliance on computer technologies, the
Company has established a firm-wide initiative managed by a Year 2000 Steering
Committee to ensure that these systems and those of the Company's outside
service providers are capable of properly recognizing and processing
date-sensitive information on or after January 1, 2000. The Steering Committee
reports regularly to senior management, the Audit Committee of the Board of
Directors and the Independent Fund Trustees on the status of the Company's Year
2000 initiative.
Year 2000 Initiative
The Company has divided the initiative into five phases: Inventory and Analysis,
Risk Assessment, Remediation, Testing and Contingency Planning.
During the Inventory and Analysis phase of the initiative, the Company
identified all of the computer technologies that could be affected by the Year
2000 Problem. This inventory included items provided by third-party service
providers. Also during this phase the Company organized its Year 2000 Steering
Committee and related sub-committees and initiated an awareness campaign for all
employees. The Inventory and Analysis phase is complete.
The Risk Assessment phase has been ongoing since the initiative began and will
continue throughout 1999. The purpose of the Risk Assessment phase was to rate
the criticality of the inventoried IT and non-IT items based on comprehensive
guidelines set forth by the Year 2000 Steering Committee. These ratings
(mission-critical, critical and non-critical) take into account the impact that
a particular failure would have on the Company's ability to conduct day-to-day
operations. The Company outsources to key service providers most of its
mission-critical administrative functions relating to its funds, including but
not limited to its transfer agency and custodial functions. As a result, the
Risk Assessment and Remediation phases of the Company's initiative have focused
on the mission-critical systems of these key service providers. These key
providers, as well as all other third-party software and hardware vendors, have
certified to the Company that they are Year 2000 compliant.
19
The Testing phase includes internal testing of all mission-critical and other
critical systems, point-to-point testing with mission-critical service providers
and industry-wide testing sponsored by the Securities Industry Association. The
Company has completed internal testing of mission-critical systems.
Point-to-point testing with mission-critical service providers is one hundred
percent complete and there are no outstanding issues. The Company participated
in the Securities Industry Association's industry-wide testing during the first
and second quarters of fiscal 1999. One hundred percent of the required
transaction types were processed successfully in the simulation conducted by the
Company, its testing partner, its transfer agent and the settlement
clearinghouses used by industry participants.
In earlier filings, the Company reported that the testing of certain critical
systems would be completed by the end of the second quarter of fiscal 1999.
However, all testing was not completed until three months later, on July 31,
1999. This delay can be attributed to the fact that one vendor required more
time than expected to remediate the custom code of a critical system. This code
has since been modified and testing has been completed.
The Company has developed contingency plans that address procedures to be
followed to minimize the impact of a particular Year 2000 failure on the
material day-to-day operations of the Company. These plans were fully tested and
in place by September 30, 1999 for all systems. A particular Year 2000 failure
may include, but not be limited to, infrastructure failures that limit access to
the Company's facilities, network system failures or communication failures. The
Company's contingency plans address these potential failures by providing for
redundant off-site network systems, alternative communication capabilities and a
back-up power supply. A Year 2000 failure may also occur with a software
application supporting a core business process. Each department has developed
contingency plans to address such a failure. The plan includes detailed steps to
be followed to prepare for, implement and transition out of the contingency plan
and may involve alternate systematic or manual procedures to perform the core
business process. Finally, the Company relies on major third-party service
providers to provide contingency plans for systems and services they provide to
the Company.
Costs
The Company currently anticipates that the costs associated with its Year 2000
initiative will consist largely of software upgrades and consulting expenses to
coordinate testing with key third-party service providers. Based on its current
estimates and information currently available, the Company does not anticipate
that the costs associated with this initiative will have a material adverse
effect on the Company's consolidated financial position, results of operations
or cash flows in future periods.
20
The total budgeted cost of the Company's Year 2000 Project in fiscal 1999 was
$728,000. The total amount expended on the project through October 31, 1999 was
approximately $748,000 of which $191,000 was expensed in the fourth quarter of
1999. Costs to date have primarily consisted of the oversight of testing
remediated software, project management, non-critical business software
application upgrades and participation in industry-wide testing and conferences.
The significant costs of remediation and testing have been borne by the
Company's vendors or third-party service providers. These organizations have
invested significant resources to become Year 2000 compliant and the costs
associated with testing and planning, on behalf of the Company and the other
clients of these firms, have been borne by these organizations.
The anticipated impact and costs of the Company's Year 2000 initiative, as well
as the anticipated completion dates for each phase, are based on management's
best estimates using information currently available and numerous assumptions
about future events. However, there can be no guarantee that these estimates
will be achieved and actual results could differ materially from those plans.
There are many risks associated with Year 2000 issues, including the risk that
the Company's computer systems and applications will not operate as intended and
that the systems and applications of key service providers and other third
parties as described above will not be Year 2000 compliant. Likewise, there can
be no assurance that costs incurred will not exceed the Company's current cost
estimate. Should the Company's significant computer systems and applications or
systems of its key service providers be unable to process date-sensitive
information accurately after 1999, the Company may be unable to conduct its
normal business operations. In addition, the Company may incur unanticipated
expenses, regulatory actions, and legal liabilities. Ultimately, no assurance
can be given that factors outside the Company's control will not disrupt
day-to-day operations or reduce revenue.
Readers are cautioned that forward-looking statements contained above regarding
the Year 2000 issue should be read in conjunction with the Company's disclosures
under the heading "Certain Factors That May Affect Future Results" below.
To the fullest extent permitted by law, the foregoing Year 2000 discussion is a
"Year 2000 Readiness Disclosure" within the meaning of The Year 2000 Information
and Readiness Disclosure Act, 15 U.S.C.Sec. 1 (1998).
Certain Factors That May Affect Future Results
From time to time, information provided by the Company or information included
in its filings with the Securities and Exchange Commission (including this
Annual Report) may contain statements that are not historical facts, for this
purpose referred to as looking statements." The Company's actual future results
may differ significantly from those stated in any forward-looking statements.
Important factors that could cause actual results to differ materially from
those indicated by such forward-looking statements include, but are not limited
to, the factors discussed below.
21
The Company is subject to substantial competition in all aspects of its
business. The Company's ability to market investment products is highly
dependent on access to the retail distribution systems of national and regional
securities dealer firms, which generally offer competing internally and
externally managed investment products. Although the Company has historically
been successful in gaining access to these channels, there can be no assurance
that it will continue to do so. The inability to have such access could have a
material adverse effect on the Company's business.
There are few barriers to entry by new investment management firms. The
Company's funds compete against an ever-increasing number of investment products
sold to the public by investment dealers, banks, insurance companies and others
that sell tax-free investments, taxable income funds, equity funds and other
investment products. Many institutions competing with the Company have greater
resources than the Company. The Company competes with other providers of
investment products offered, the investment performance of such products,
quality of service, fees charged, the level and type of sales representative
compensation, the manner in which such products are marketed and distributed and
the services provided to investors.
The Company derives almost all of its revenue from investment adviser and
administration fees and distribution income received from the Eaton Vance funds
and separately managed accounts. As a result, the Company is dependent upon the
contractual relationships it maintains with these funds and separately managed
accounts. In the event that any of the management contracts, administration
contracts, underwriting contracts or service agreements are not renewed pursuant
to the terms of these contracts or agreements, the Company's financial results
may be adversely affected.
The major sources of revenue for the Company (i.e., investment adviser fees and
distribution income) are calculated as percentages of assets under management. A
decline in securities prices in general would reduce fee income. Also, financial
market declines or adverse changes in interest rates will negatively impact the
Company's assets under management and consequently, its revenue and net income.
If, as a result of inflation, expenses rise and assets under management decline,
lower fee income and higher expenses will reduce or eliminate profits. If
expenses rise and assets rise, bringing increased fees to offset the increased
expenses, profits may not be affected by inflation. There is no predictable
relationship between changes in financial assets under management and the rate
of inflation.
Market Risk
In the normal course of business, the financial position of the Company is
routinely subjected to a variety of risks, including market risks associated
with interest rate movements. The Company is exposed to changes in the interest
rates primarily in its cash, investment and debt transactions. The Company does
not believe that the effect of reasonably possible near-term changes in interest
rates on the Company's financial position would be material.
22
<PAGE>
52
<TABLE>
Consolidated Statements of Income
- -------------------------------------------------------------------------------------
<CAPTION>
Years Ended
October 31,
(in thousands, except per share figures) 1999 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE:
Investment adviser and administration fees $198,644 $152,481 $117,540
Distribution income 146,436 91,347 77,276
Income from real estate activities 1,931 4,405 4,155
Other income 1,939 1,754 1,939
- -------------------------------------------------------------------------------------
Total revenue 348,950 249,987 200,910
- -------------------------------------------------------------------------------------
EXPENSES:
Compensation of officers and employees 68,535 58,343 48,155
Amortization of deferred sales commissions 63,991 64,570 54,464
Sales commission expense (Note 2) 71,282 29,965 --
Other expenses 67,238 48,457 34,386
- -------------------------------------------------------------------------------------
Total expenses 271,046 201,335 137,005
- -------------------------------------------------------------------------------------
Operating income 77,904 48,652 63,905
OTHER INCOME (EXPENSE):
Interest income 3,631 5,609 3,571
Interest expense (2,960) (3,818) (3,951)
Gain on sale of investments 7,325 2,126 3,561
Equity in net income of affiliates 10 105 384
Impairment loss on real estate -- (2,636) --
- -------------------------------------------------------------------------------------
Income before income taxes and cumulative effect
of change in accounting principle 85,910 50,038 67,470
Income taxes 33,505 19,515 27,236
- -------------------------------------------------------------------------------------
Income before cumulative effect of change
in accounting principle 52,405 30,523 40,234
Cumulative effect of change
in accounting principle, net of income taxes (36,607) -- --
- -------------------------------------------------------------------------------------
Net income $ 15,798 $ 30,523 $ 40,234
- -------------------------------------------------------------------------------------
Earnings per share before cumulative effect
of change in accounting principle:
Basic $ 1.46 $ 0.84 $ 1.08
- -------------------------------------------------------------------------------------
Diluted $ 1.41 $ 0.81 $ 1.04
- -------------------------------------------------------------------------------------
Cumulative effect of change in
accounting principle, per share:
Basic $ (1.02) $ -- $ --
- -------------------------------------------------------------------------------------
Diluted $ (0.98) $ -- $ --
- -------------------------------------------------------------------------------------
Earnings per share:
Basic $ 0.44 $ 0.84 $ 1.08
- -------------------------------------------------------------------------------------
Diluted $ 0.43 $ 0.81 $ 1.04
- -------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
23
<PAGE>
53
<TABLE>
Consolidated Balance Sheets
- ---------------------------
<CAPTION>
October 31,
(in thousands) 1999 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
CURRENT ASSETS:
Cash and equivalents $ 77,395 $ 54,386
Short-term investments -- 42,049
Investment adviser fees and other receivables 9,101 5,331
Real estate assets held for sale 1,451 16,551
Other current assets 2,541 12,116
- --------------------------------------------------------------------------------------------
Total current assets 90,488 130,433
- --------------------------------------------------------------------------------------------
OTHER ASSETS:
Investments:
Investment in affiliates 7,235 7,593
Investment companies 15,106 15,815
Other investments 6,326 2,242
Other receivables 5,836 5,844
Deferred sales commissions 219,201 213,819
Equipment and leasehold improvements,
net of accumulated depreciation and
amortization of $3,425 and $5,793, respectively 12,459 2,696
Goodwill and other intangibles, net of
accumulated amortization of $422 and $4,197, respectively 1,578 1,818
- --------------------------------------------------------------------------------------------
Total other assets 267,741 249,827
- --------------------------------------------------------------------------------------------
Total assets $358,229 $380,260
- --------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
24
<PAGE>
54
<TABLE>
<CAPTION>
October 31,
(in thousands, except share figures) 1999 1998
- --------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
<S> <C> <C>
CURRENT LIABILITIES:
Accrued compensation $ 20,947 $ 17,013
Accounts payable and accrued expenses 14,938 9,882
Dividend payable 3,357 2,681
Current portion of long-term debt 7,143 17,314
Other current liabilities 2,505 2,067
- ------------------------------------------------------------------------------------------
Total current liabilities 48,890 48,957
- ------------------------------------------------------------------------------------------
6.22% Senior Note 28,571 35,714
- ------------------------------------------------------------------------------------------
Deferred income taxes 86,500 83,780
- ------------------------------------------------------------------------------------------
Commitments and contingencies -- --
SHAREHOLDERS' EQUITY:
Common stock, par value $0.015625 per share:
Authorized, 320,000 shares
Issued, 77,440 shares 1 1
Non-voting common stock, par value $0.015625 per share:
Authorized, 47,680,000 shares
Issued, 35,182,355 and 35,588,373 shares, respectively 550 556
Additional paid-in capital -- --
Accumulated other comprehensive income 4,040 1,120
Notes receivable from stock option exercises (2,231) (2,957)
Retained earnings 191,908 213,089
- ------------------------------------------------------------------------------------------
Total shareholders' equity 194,268 211,809
- ------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $358,229 $380,260
- --------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
25
<PAGE>
55
<TABLE>
Consolidated Statements of Cash Flows
- -------------------------------------
<CAPTION>
Years Ended
October 31,
(in thousands) 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and equivalents, beginning of year $ 54,386 $ 61,928 $ 55,583
- ---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 15,798 30,523 40,234
Adjustments to reconcile net income to net cash provided by operating
activities:
Cumulative effect of change in accounting principle,
net of tax 36,607 -- --
Equity in net income of affiliates (10) (105) (384)
Dividend received from affiliate 368 430 928
Impairment loss on real estate -- 2,636 --
Deferred income taxes 26,580 14,972 (2,802)
Amortization of deferred sales commissions 63,991 64,570 54,464
Depreciation and other amortization 1,675 2,174 2,600
Payment of capitalized sales commissions (147,291) (128,707) (76,333)
Capitalized sales charges received 17,488 22,583 29,658
Gain on sale of investments (7,325) (2,126) (3,561)
Changes in other assets and liabilities 14,185 2,947 (91)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 22,066 9,897 44,713
- ---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate, equipment
and leasehold improvements (11,823) (1,849) (2,201)
Net decrease in notes and receivables from affiliates 735 892 694
Proceeds from sale of real estate 25,170 7,518 3,534
Proceeds from sale of investments 49,991 162,841 64,294
Purchase of investments (10,673) (133,195) (79,084)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) investing activities 53,400 36,207 (12,763)
- ---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Revolving credit facility borrowings 12,000 7,000 --
Payments on notes payable (27,138) (14,394) (1,573)
Proceeds from issuance of non-voting common stock 8,025 5,615 5,627
Dividends paid (10,780) (8,760) (7,839)
Repurchase of non-voting common stock (34,564) (43,107) (21,820)
- ---------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (52,457) (53,646) (25,605)
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and equivalents 23,009 (7,542) 6,345
- ---------------------------------------------------------------------------------------------------------------------
Cash and equivalents, end of year $ 77,395 $ 54,386 $ 61,928
- ---------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 3,014 $ 3,871 $ 3,887
- ---------------------------------------------------------------------------------------------------------------------
Income taxes paid $ 5,477 $ 7,521 $ 36,737
- ---------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
26
</TABLE>
<PAGE>
56
<TABLE>
Consolidated Statements of Shareholders' Equity and Comprehensive Income
- ------------------------------------------------------------------------
<CAPTION>
Years Ended
October 31,
(in thousands) 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK AT PAR VALUE:
Balance, end of year $ 1 $ 1 $ 1
- ---------------------------------------------------------------------------------------------------------
NON-VOTING COMMON STOCK AT PAR VALUE:
Balance, beginning of year $ 556 $ 577 $ 585
Issuance on exercise of stock options 11 10 15
Issuance under employee stock purchase plan 1 1 1
Issuance under employee incentive plan 1 1 1
Repurchase (19) (33) (25)
- ---------------------------------------------------------------------------------------------------------
Balance, end of year $ 550 $ 556 $ 577
- ---------------------------------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of year $ -- $ 21,001 $ 36,788
Issuance on exercise of stock options 5,249 4,042 4,702
Issuance under employee stock purchase plan 1,036 763 592
Issuance under employee incentive plan 1,728 798 316
Tax benefit of stock option exercises 1,009 2,827 398
Repurchase (9,022) (29,431) (21,795)
- ---------------------------------------------------------------------------------------------------------
Balance, end of year $ -- $ -- $ 21,001
- ---------------------------------------------------------------------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Balance, beginning of year $ 1,120 $ 2,445 $ 3,598
Unrealized gain (loss) on marketable securties, net of tax 2,920 (1,325) (1,153)
- ---------------------------------------------------------------------------------------------------------
Balance, end of year $ 4,040 $ 1,120 $ 2,445
- ---------------------------------------------------------------------------------------------------------
NOTES RECEIVABLE FROM STOCK OPTION EXERCISES:
Balance, beginning of year $ (2,957) $ (3,168) $ (3,221)
Issuance on exercise of stock options (1,534) (674) (718)
Collections on notes receivable 2,260 885 771
- ---------------------------------------------------------------------------------------------------------
Balance, end of year $ (2,231) $ (2,957) $ (3,168)
- ---------------------------------------------------------------------------------------------------------
RETAINED EARNINGS:
Balance, beginning of year $213,089 $205,424 $173,029
Net income 15,798 30,523 40,234
Dividends declared ($0.32, $0.26, $0.21 per share) (11,456) (9,215) (7,839)
Repurchase (25,523) (13,643) --
- ---------------------------------------------------------------------------------------------------------
Balance, end of year $191,908 $213,089 $205,424
- ---------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY $194,268 $211,809 $226,280
- ---------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING:
Shares outstanding, beginning of year 35,666 37,015 37,536
Issuance on exercise of stock options 718 641 979
Issuance under employee stock purchase plan 51 62 72
Issuance under employee incentive plan 79 47 34
Repurchase (1,254) (2,099) (1,606)
- ---------------------------------------------------------------------------------------------------------
Shares outstanding, end of year 35,260 35,666 37,015
- ---------------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME:
Net income $ 15,798 $ 30,523 $ 40,234
Other comprehensive income (loss) 2,920 (1,325) (1,153)
- ---------------------------------------------------------------------------------------------------------
Comprehensive income $ 18,718 $ 29,198 $ 39,081
- ---------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
27
<PAGE>
57
Notes to Consolidated Financial Statements
- ------------------------------------------
1. Summary of Significant Accounting Policies
BUSINESS AND ORGANIZATION
Eaton Vance Corp. and subsidiaries (the Company) provide investment advisory and
distribution services to mutual funds and investment management services to
private counsel clients. Revenue is largely dependent on the total value and
composition of assets under management, which include domestic and international
equity, domestic and international debt, and bank loan portfolios. Accordingly,
fluctuations in financial markets and in the composition of assets under
management impact revenue and the results of operations.
SEGMENT INFORMATION
Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about
Segments of an Enterprise and Related Information," establishes disclosure
requirements relating to operating segments in annual and interim financial
statements. Management has assessed the requirements of SFAS No. 131 and
determined that the Company operates in one business segment, namely as an
investment advisor managing both domestic and international portfolios.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Eaton Vance Corp.
and all of its wholly owned subsidiaries. The equity method of accounting is
used for investments in affiliates in which the Company's ownership ranges from
20 to 50 percent. All material intercompany accounts and transactions have been
eliminated.
CASH AND EQUIVALENTS
Cash and equivalents consist principally of short-term, highly liquid
investments and are recorded at cost, which is equivalent to market value.
INVESTMENTS
Management determines the appropriate classification of its investments at the
time of purchase. Investments are classified as held-to-maturity when the
Company has the positive intent and ability to hold the securities to maturity.
Held-to-maturity investments are stated at cost and adjusted for amortization of
premiums and discounts to maturity. Marketable investments not classified as
held-to-maturity are classified as available-for-sale. Available-for-sale
investments are carried at their estimated fair value. Net unrealized holding
gains or losses on these investments are reported net of income taxes as a
separate component of accumulated other comprehensive income in shareholders'
equity. The cost of investments sold is based on the average cost method.
Investments in investment companies held in connection with the Company's
activities as principal underwriter are recorded at market value. Realized and
unrealized gains and losses are reflected in income.
Certain other investments are carried at the lower of cost or management's
estimate of net realizable value.
REAL ESTATE ASSETS HELD FOR SALE
Real estate assets held for sale are carried at the lower of cost or fair market
value less cost to sell and are not depreciated while they are held for sale.
28
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements are stated at cost, less accumulated
depreciation and amortization. Depreciation and amortization are provided
principally by the straight-line method over the estimated useful lives of the
related assets, or over the terms of the related leases, if shorter.
DEFERRED SALES COMMISSIONS
Sales commissions paid to brokers and dealers in connection with the sale of
shares of open-end and bank loan interval funds are capitalized and amortized
over various periods, none of which exceeds six years. Distribution plan
payments received from these funds are recorded in income as earned. Contingent
deferred sales charges and early withdrawal charges received by the Company from
redeeming shareholders of open-end and bank loan interval funds, respectively,
reduce unamortized deferred sales commissions first, with any remaining amount
recorded in income.
From July 23, 1998 to April 30, 1999, sales commissions paid to brokers and
dealers in connection with the sale of bank loan interval funds were expensed as
incurred. Prior to July 23, 1998, these payments were capitalized and amortized
over one to five years. (See Note 2).
Sales commissions paid to brokers and dealers in connection with the sale of
shares of traditional closed-end funds are expensed as incurred.
GOODWILL AND OTHER INTANGIBLES
Goodwill represents the excess of the cost of the Company's investment in the
net assets or stock of acquired companies over the fair value of the underlying
net assets at dates of acquisition. Other intangibles represent the cost of
management contracts acquired. Amortization is provided on a straight-line basis
over the estimated useful lives of these assets, not exceeding 20 years.
REVENUE RECOGNITION
Investment advisory, administration and distribution fees are accrued as earned.
Sales of shares of investment companies in connection with the Company's
activities as principal underwriter are accounted for on a settlement date
basis, with the related commission income and expense recorded on a trade date
basis.
INCOME TAXES
Deferred income taxes reflect the expected future tax consequences of temporary
differences between the carrying amounts and tax bases of the Company's assets
and liabilities. Such taxes relate principally to capitalized sales commissions
paid to brokers and dealers, which are deducted currently for tax purposes.
EARNINGS PER SHARE
On November 1, 1997, the Company adopted SFAS No. 128, "Earnings per Share," and
restated all prior-period earnings per share data. Basic earnings per share
excludes the dilutive effect of outstanding stock options and is computed by
dividing net income by the weighted average common shares outstanding of 35.8
million, 36.3 million, and 37.3 million in 1999, 1998 and 1997, respectively.
Diluted earnings per share reflects the potential dilution that could occur if
all outstanding stock options were exercised. It is computed by increasing the
denominator of the basic calculation by potentially dilutive common shares of
1.4 million, 1.5 million, and 1.4 million in 1999, 1998 and 1997, respectively.
29
STOCK-BASED COMPENSATION
Effective November 1, 1996, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation." The Company has elected to continue to account for
stock-based compensation in accordance with Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, pro
forma net income and earnings per share information has been presented in Note 7
as required under SFAS No. 123.
COMPREHENSIVE INCOME
Effective November 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes the disclosure requirements for
reporting comprehensive income in an entity's financial statements. Total
comprehensive income is reported in the Consolidated Statements of Shareholders'
Equity and Comprehensive Income and includes net income and net unrealized gains
and losses on investments classified as available-for-sale, net of income taxes.
ACCOUNTING ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Changes in such estimates may affect amounts reported in future periods.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current year
presentation.
2. Significant Accounting Change
In September 1998, the Financial Accounting Standards Board (FASB) staff
addressed the accounting for offering costs incurred in connection with the
distribution of funds when the adviser does not receive both 12b-1 fees and
contingent deferred sales charges. In its announcement, the FASB staff concluded
that such offering costs, including sales commissions paid, were to be
considered start-up costs in accordance with the American Institute of Certified
Public Accountants Statement of Position (SOP) 98-5, "Reporting on the Costs of
Start-Up Activities." Accordingly, the FASB staff concluded that subsequent to
July 23, 1998, the effective date of the announcement, these offering costs
should be expensed as incurred. Prior to the FASB staff announcement, it had
been the Company's policy to capitalize and amortize these costs over a period
not to exceed five years.
30
In order to comply with the requirements of both the FASB staff announcement and
SOP 98-5, the Company expensed all offering costs incurred subsequent to July
23, 1998 in connection with the distribution of its closed-end funds and bank
loan interval funds which did not have both 12b-1 fees and contingent deferred
sales charges. Closed-end, interval and private fund sales commissions paid and
capitalized prior to and including the July 23, 1998 effective date of the FASB
staff announcement were expensed as a cumulative effect of change in accounting
principle, as described in APB Opinion No. 20, "Accounting Changes," upon
adoption of SOP 98-5 by the Company effective November 1, 1998. The cumulative
effect of the adoption on November 1, 1998 was $36.6 million, net of income
taxes of $23.4 million.
In April of 1999, the bank loan interval funds received shareholder approval and
a Securities and Exchange Commission (SEC) exemptive order permitting them,
beginning May 1, 1999, to implement Rule 12b-1 equivalent distribution plans.
With the implementation of these distribution plans, the Company resumed
capitalizing and amortizing sales commissions paid to broker-dealers for sales
of its bank loan interval funds effective May 1, 1999, the beginning of the
third fiscal quarter. Closed-end and bank loan interval fund sales commissions
expensed from November 1, 1998 to April 30, 1999 totaled $71.3 million.
The change in accounting treatment has not had, nor will have, any effect on the
Company's cash flow or cash position.
3. Investment in Affiliates
The Company has a 21 percent equity interest in Lloyd George Management (BVI)
Limited (LGM), an independent investment management company based in Hong Kong
that manages a series of emerging market mutual funds sponsored by the Company.
The Company's investment in LGM was $7.2 million and $7.6 million at October 31,
1999 and 1998, respectively. At October 31, 1999, the Company's investment
exceeded its share of the underlying net assets of LGM by $5.2 million. This
excess is being amortized over a 20-year period.
The Company received gold mining securities with a value of $1.0 million in
1997, resulting from the distribution of assets upon termination of two gold
mining partnerships in which the Company had general and limited partnership
interests. The Company also received gold mining securities with a value of $2.1
million in 1997, in settlement of notes receivable for management services
provided to these partnerships.
4. Real Estate Investments
The carrying value of real estate assets held for sale at October 31, 1999 and
1998 follow:
1999 1998
- -------------------------------------------------------------
(in thousands)
Shopping center:
Troy, NY $ -- $2,179
Warehouses:
Springfield, MA 1,451 1,451
Colonie, NY -- 1,579
Office buildings:
Boston, MA -- 6,151
Boston, MA -- 3,775
Troy, NY -- 1,416
-----------------------------------------------------------
Total $1,451 $16,551
- -------------------------------------------------------------
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," requires that the carrying value of assets
held for sale be reported at the lower of carrying value or fair value less cost
to sell. In accordance with the provisions of SFAS No. 121, the Company
recognized a pre-tax impairment loss of $2.6 million in the first quarter of
1998 based on the estimated fair values, less cost to sell, of the shopping
center and office building located in Troy, New York. In fiscal 1999, the
Company, through a wholly owned subsidiary, sold the shopping center and office
building in Troy, New York. The purchaser agreed to acquire the property for
fifty thousand dollars and the related indebtedness. A wholly owned subsidiary
of the Company will remain as a guarantor on the related indebtedness until such
time as certain net operating income and debt service requirements on the
property are met.
31
Also in fiscal 1999, the Company, through a wholly owned subsidiary, sold the
warehouse in Colonie, New York and two office buildings in Boston,
Massachusetts. The Company recognized pretax gains of $1.3 million and $12.4
million, respectively, based on aggregate carrying values of $1.6 million and
$9.9 million, respectively.
In fiscal 1998, the Company sold a shopping center located in Goffstown, New
Hampshire and recognized a pre-tax gain of $1.8 million based on a carrying
value of $5.5 million at the time of sale.
The Company expects the sale of the Springfield, Massachusetts property to be
completed in fiscal 2000. The estimated fair value less cost to sell of the
Springfield property exceeded its carrying value at October 31, 1999.
5. Long-Term Debt
6.22% SENIOR NOTE
The Company has a 6.22% Senior Note due March 2004 with a remaining balance of
$35.7 million at October 31, 1999. Principal payments on the note are due in
equal annual installments of approximately $7.1 million. The note may be prepaid
in part or in full at any time. Certain covenants in the Senior Note Purchase
Agreement require specific levels of cash flow and net income and others
restrict additional investment and indebtedness.
REVOLVING CREDIT FACILITY
The Company has a five-year, senior unsecured revolving credit agreement with
six unaffiliated banks under which it may borrow up to $50 million. The terms of
the facility provide for various borrowing rate options and allow the Company to
increase the facility amount to a maximum of $75 million at any time during the
five-year period. The agreement contains financial covenants with respect to
borrowings, tangible net worth, leverage and interest coverage and requires the
Company to pay an annual facility fee on the total commitment. The facility fee
is calculated on a pricing grid based on the Company's total debt to earnings
ratio. At October 31, 1999, the Company had no borrowings under this facility.
32
6. Lease Commitments
The Company leases certain real estate under noncancelable operating leases.
Rent expense under these leases in 1999, 1998 and 1997 amounted to $2.4 million,
$0.6 million and $0.6 million, respectively. Future minimum lease commitments
are as follows:
Year Ending
October 31 Amount
- ------------------------------------
(in thousands)
2000 $ 3,578
2001 3,815
2002 4,042
2003 4,291
2004 4,599
2005 - 2009 21,609
- ------------------------------------
Total $41,934
- ------------------------------------
7. Stock Plans
The Company has elected to continue to account for stock-based compensation in
accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
and has provided below the additional pro forma disclosures required by SFAS
No. 123.
In accordance with APB Opinion No. 25, no compensation cost has been recognized
in the consolidated financial statements for the Company's stock option, stock
purchase and stock alternative plans. Had compensation cost for the Company's
stock-based compensation plans been determined consistent with the fair value
method as described in SFAS No. 123, the Company's net income and earnings per
share for the years ended October 31, 1999, 1998 and 1997 would have been
reduced to the following pro forma amounts:
1999 1998 1997
- ---------------------------------------------------------------
(net income figures in thousands)
Net income:
As reported $15,798 $30,523 $40,234
Pro forma $13,627 $28,861 $39,044
Earnings per share:
As reported:
Basic $ 0.44 $ 0.84 $ 1.08
Diluted $ 0.43 $ 0.81 $ 1.04
Pro forma:
Basic $ 0.38 $ 0.80 $ 1.05
Diluted $ 0.37 $ 0.76 $ 1.01
The fair value of each option grant included in the pro forma net income shown
above is estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted-average assumptions used for grants in fiscal
1999, 1998 and 1997:
1999 1998 1997
- ---------------------------------------------------
Dividend yield 1.1% 1.3% 1.8%
Volatility 31% 29% 30%
Risk-free
interest rate 6.4% 4.2% 6.2%
Expected life of
options 8 years 5 years 5 years
For purposes of pro forma disclosure, the estimated fair value of each option
grant is amortized to expense ratably over the option vesting period. These pro
forma amounts may not be indicative of the future benefit, if any, to be
received by the option holder.
The pro forma information reflected above may not be representative of the
amounts to be expected in future years, as the fair value method of accounting
described in SFAS No. 123 is not applicable to options granted in fiscal years
prior to 1996.
33
STOCK OPTION PLAN
The Company has a Stock Option Plan (the 1998 Plan) administered by the Option
Committee of the Board of Directors under which stock options may be granted to
key employees of the Company. No stock options may be granted under the plan
with an exercise price of less than the fair market value of the stock at the
time the stock option is granted. The options expire five to ten years from the
date of grant and vest over a four to five year period as stipulated in each
grant. The 1998 Plan contains provisions which, in the event of a change in
control of the Company, may accelerate the vesting of awards. A total of 3.6
million shares have been reserved for issuance under the 1998 Plan. Through
October 31, 1999, 1.3 million shares have been issued pursuant to this plan.
Stock option transactions under the 1998 Plan and predecessor plans are
summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------------
WEIGHTED- Weighted- Weighted-
AVERAGE Average Average
EXERCISE Exercise Exercise
SHARES PRICE Shares Price Shares Price
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(share figures in thousands)
Balance, beginning of period 2,606 $10.78 2,642 $ 7.95 2,866 $ 5.86
Granted 706 23.01 654 18.08 993 10.51
Exercised (718) 7.33 (641) 6.32 (979) 4.81
Forfeited/Expired (29) 17.03 (49) 14.12 (238) 6.64
- -------------------------------------------------------------------------------------------------------
Balance, end of period 2,565 $15.04 2,606 $10.78 2,642 $ 7.95
- -------------------------------------------------------------------------------------------------------
</TABLE>
The weighted average fair value of options granted during the years October 31,
1999, 1998 and 1997 were $10.17, $5.29 and $3.30 per share, respectively.
Outstanding options to subscribe to shares of non-voting common stock issued
under the 1998 Plan and predecessor plans are summarized as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- -------------------------------------------------------------------------------------------------------------
Weighted-
Average Weighted- Weighted-
Remaining Average Exercisable Average
Outstanding Contractual Exercise as of Exercise
Range of Exercise Prices as of 10/31/99 Life Price 10/31/99 Price
- -------------------------------------------------------------------------------------------------------------
(share figures in thousands)
<S> <C> <C> <C> <C> <C>
$5.74 - $7.06 365 0.9 $ 6.72 363 $ 6.72
$7.77 - $10.72 900 2.1 10.43 647 10.41
$11.22 - $11.48 27 2.2 11.42 1 11.48
$17.84 - $18.03 540 3.0 17.85 210 17.85
$19.63 - $20.81 42 4.0 19.88 6 19.63
$22.63 - $23.13 687 6.8 23.00 12 23.03
$36.50 4 7.7 36.50 -- --
- -------------------------------------------------------------------------------------------------------------
2,565 3.4 $15.04 1,239 $10.75
- -------------------------------------------------------------------------------------------------------------
</TABLE>
In November 1999, the Company granted options for an additional 588,000 shares
under the 1998 Plan at prices ranging from $34.38 to $37.82.
34
EMPLOYEE STOCK PURCHASE PLAN
A total of 2.2 million shares of the Company's non-voting common stock have been
reserved for issuance under the Employee Stock Purchase Plan. The plan permits
eligible full-time employees to direct up to 15 percent of their salaries to a
maximum of $12,500 toward the purchase of Eaton Vance Corp. non-voting common
stock at the lower of 90 percent of the market price of the non-voting common
stock at the beginning or at the end of each six-month offering period. Through
October 31, 1999, 1.5 million shares have been issued pursuant to this plan.
INCENTIVE PLAN-STOCK ALTERNATIVE
A total of 1.2 million shares of the Company's non-voting common stock have been
reserved for issuance under the Incentive Plan-Stock Alternative. The plan
permits employees and officers to direct up to half of their monthly and annual
incentive bonuses toward the purchase of non-voting common stock at 90 percent
of the average market price of the stock for the five days subsequent to the end
of the six-month offering period. Through October 31, 1999, 475,000 shares have
been issued pursuant to this plan.
EXECUTIVE LOAN PROGRAM
The Company has established an Executive Loan Program under which a maximum of
$10.0 million is available for loans to certain key employees for purposes of
financing the exercise of stock options for shares of the Company's non-voting
common stock. Such loans are written for a seven-year period, at varying fixed
interest rates (currently ranging from 4.8 percent to 8.1 percent), are payable
in annual installments commencing with the third year in which the loan is
outstanding, and are collateralized by the stock issued upon exercise of the
option. Loans outstanding under this program amounted to $2.2 million and $3.0
million at October 31, 1999 and 1998, respectively.
8. Employee Benefit Plans
PROFIT SHARING RETIREMENT PLANS
The Company has two discretionary profit sharing retirement plans for the
benefit of substantially all employees whereby up to 15 percent of eligible
compensation of participants may be contributed. The Company has contributed
$3.7 million, $2.9 million and $2.9 million, the maximum amounts permitted under
the plans, for the years ended October 31, 1999, 1998 and 1997, respectively.
35
SAVINGS PLAN AND TRUST
The Company has a Savings Plan and Trust that is qualified under Section 401 of
the Internal Revenue Code. All full-time employees who have met certain age and
length of service requirements are eligible to participate in the plan. This
plan allows participating employees to contribute up to eight percent of their
gross salary on a pretax basis to the plan. The Company then matches each
participant's contribution on a dollar-for-dollar basis up to a maximum of
$1,040. The Company's expense under the plan was $0.3 million, $0.2 million and
$0.3 million for the years ended October 31, 1999, 1998 and 1997, respectively.
SUPPLEMENTAL PROFIT SHARING PLAN
The Company has an unfunded, non-qualified Supplemental Profit Sharing Plan
whereby certain key employees of the Company may receive profit sharing
contributions in excess of the amounts allowed under the Profit Sharing
Retirement Plan. No employee may receive combined contributions in excess of
$30,000 to the Profit Sharing Retirement Plan and the Supplemental Profit
Sharing Plan. The Company's expense under the plan for each of the years ended
October 31, 1999, 1998 and 1997 was $0.1 million.
9. Common Stock Repurchases
On October 13, 1999, the Company's Board of Directors authorized the purchase by
the Company of up to 2.0 million shares of the Company's non-voting common
stock. Through October 31, 1999, 51,000 shares have been acquired under this
authorization. An additional 1.2 million shares were purchased in fiscal 1999
under a previous authorization.
10. Income Taxes
The provision for income taxes for the years ended October 31, 1999, 1998 and
1997 consists of the following:
- ------------------------------------------------------------
1999 1998 1997
- ------------------------------------------------------------
(in thousands)
Current:
Federal $ 6,321 $ 4,097 $25,162
State 604 446 4,876
Deferred:
Federal 23,209 12,910 (2,405)
State 3,371 2,062 (397)
- ------------------------------------------------------------
Total $33,505 $19,515 $27,236
- ------------------------------------------------------------
Deferred income taxes reflect the expected future tax consequences of temporary
differences between the carrying amounts and tax bases of the Company's assets
and liabilities. The significant components of deferred income taxes are as
follows:
1999 1998
- ------------------------------------------------------------
(in thousands)
Deferred tax assets:
Unrealized capital
losses $ -- $ 1,059
Tax benefit of stock
option awards 904 59
Impairment loss on
real estate -- 1,005
Investments in affiliate
and limited partnership 400 513
Other 1,253 943
- ------------------------------------------------------------
Total $ 2,557 $ 3,579
- ------------------------------------------------------------
Deferred tax liabilities:
Deferred sales
commissions $84,344 $82,618
Differences between
book and tax bases
of property 458 784
Unrealized net
holding gains
on investments 2,484 680
Other 1,097 1,188
- ------------------------------------------------------------
Total $88,383 $85,270
- ------------------------------------------------------------
Net deferred tax liability $85,826 $81,691
- ------------------------------------------------------------
Deferred tax assets and liabilities are reflected on the Company's consolidated
balance sheets at October 31, 1999 and 1998 as follows:
1999 1998
- ------------------------------------------------------------
(in thousands)
Net current
deferred tax asset $ (674) $(2,089)
Net non-current
deferred tax liability 86,500 83,780
- ------------------------------------------------------------
Net deferred tax liability $85,826 $81,691
- ------------------------------------------------------------
36
The following table reconciles the statutory federal income tax rate to the
Company's effective income tax rate:
1999 1998 1997
- ------------------------------------------------------------------
Federal statutory
tax rate 35.0% 35.0% 35.0%
Increases
(decreases) in
taxes from:
State income tax
(net of effect
of federal tax) 3.0 3.2 4.3
Other 1.0 0.8 1.1
- ------------------------------------------------------------------
Effective tax rate 39.0% 39.0% 40.4%
- ------------------------------------------------------------------
The Massachusetts Department of Revenue (MDOR) has examined the tax returns for
the Company and its subsidiaries for the fiscal years 1993 through 1995. In
connection with this examination, the MDOR has assessed additional taxes and
interest of $5.8 million. In the opinion of management, after consultation with
outside tax and legal counsel, there is significant merit to the positions
claimed on the tax returns as filed and the Company intends to vigorously
contest the assessment. However, Massachusetts General Laws require the Company
to pay the assessment in advance. At October 31, 1999 and 1998, the payment has
been recorded in "Other receivables" on the Company's consolidated balance
sheets.
11. Financial Instruments
The estimated fair values of the Company's financial instruments have been
determined by the Company using available market information and appropriate
valuation methodologies. The
fair value amounts discussed below are not necessarily indicative of either the
amounts the Company would realize upon disposition of these instruments or the
Company's intent or ability to dispose of these assets.
CASH AND EQUIVALENTS
The estimated fair value of cash and equivalents approximates their carrying
value.
SHORT-TERM INVESTMENTS AND INVESTMENT IN INVESTMENT COMPANIES
Short-term investments and investments in investment companies primarily consist
of available-for-sale securities recorded at current market prices. The
estimated fair value of these securities approximates their carrying value.
OTHER INVESTMENTS
Included in other investments at October 31, 1999 is a held-to-maturity debt
security with a contractual maturity in excess of ten years. The estimated fair
value of this security approximates its amortized cost of $5.1 million.
Also included in other investments are certain investments carried at cost,
amounting to $0.9 million at both October 31, 1999 and 1998. Management believes
that the fair value of these investments approximates their carrying value.
The remaining securities in other investments primarily consist of
available-for-sale securities recorded at current market prices. The estimated
fair value of these securities amounting to $0.3 million and $1.3 million at
October 31, 1999 and 1998, respectively, approximates their carrying value.
37
NOTES RECEIVABLE AND RECEIVABLES FROM AFFILIATES
The estimated fair value of notes receivable included in "Other receivables" and
"Notes receivable from stock option exercises" on the Company's consolidated
balance sheet has been calculated by discounting expected future cash flows
using management's estimates of current market interest rates for such notes and
receivables. The estimated fair value of these notes and receivables
approximates their carrying value.
6.22% SENIOR NOTE
The estimated fair value of the Company's 6.22% Senior Note at October 31, 1999
and 1998 is $34.8 million and $43.4 million, respectively, based on discounted
future cash flows using a market interest rate available for debt with similar
terms and remaining maturity.
UNREALIZED SECURITIES HOLDING GAINS
The Company has classified as available-for-sale securities having an aggregate
fair value of $15.5 million and $59.2 million at October 31, 1999 and 1998,
respectively. These securities are classified as "Short-term investments,"
"Investments in investment companies," and "Other investments" on the Company's
consolidated balance sheet. Gross unrealized gains of $6.8 million and $4.7
million and gross unrealized losses of $0.2 million and $2.9 million at October
31, 1999 and 1998, respectively, have been excluded from earnings and reported
in accumulated other comprehensive income as a separate component of
shareholders' equity, net of deferred taxes.
12. Regulatory Requirements
Eaton Vance Distributors, Inc., a wholly-owned subsidiary of the Company and
principal underwriter of the Eaton Vance Funds, is subject to the SEC uniform
net capital rule (Rule 15c3-1) which requires the maintenance of minimum net
capital. For purposes of this rule, the subsidiary had net capital of $24.8
million, which exceeds its minimum net capital requirement of $0.7 at October
31, 1999. The ratio of aggregate indebtedness to net capital at October 31, 1999
was 0.42-to-1.
13. Accounting Developments
In June of 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting and
reporting standards requiring that every derivative instrument be recorded on
the balance sheet as either an asset or a liability measured at its fair value.
The Company has not yet determined the effect, if any, of this announcement on
the consolidated financial statements. The Company intends to adopt the
provisions of SFAS No. 133 as amended by SFAS No. 137 in fiscal 2001.
14. Related-Party Transactions
Investment advisory and distribution income earned from investment companies
sponsored by the Company were $332.6 million, $231.2 million and $183.7 million
in 1999, 1998 and 1997, respectively.
38
The portfolios and related funds that provided over 10 percent of the total
revenue of the Company are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------------------------------------------------
(dollar figures in thousands)
<S> <C> <C> <C>
Senior Debt Portfolio and related funds:
Investment adviser and administration fees,
distribution fees, early withdrawal charges
and service fees $99,544 $57,410 $41,385
Percent of revenue 28.5% 23.0% 20.7%
Tax-Managed Growth Portfolio and related funds:
Investment adviser and administration fees,
underwriting commissions, distribution
plan payments, contingent deferred sales
charges and service fees $96,625 $46,462 $13,956
Percent of revenue 27.7% 18.6% 7.0%
National Municipals Portfolio and related funds:
Investment adviser and administration fees,
underwriting commissions, distribution
plan payments, contingent deferred sales
charges and service fees $25,098 $25,552 $25,121
Percent of revenue 7.2% 10.2% 12.5%
</TABLE>
Investments in sponsored mutual funds that are classified as "Cash and
equivalents," "Short-term investments" and "Investment in investment companies"
in the accompanying consolidated financial statements aggregate approximately
$37.5 million and $82.0 million at October 31, 1999 and 1998, respectively.
Dividend and interest income earned on these investments aggregated
approximately $3.1 million, $5.6 million and $3.2 million in 1999, 1998 and
1997, respectively. The Company recognized net (losses) gains of approximately
($1.0) million, $3.0 million and $2.7 million in 1999, 1998 and 1997,
respectively, resulting from the disposition of sponsored mutual fund
investments.
The Company earned fees of $0.4 million in 1997 for providing management and
administration services to affiliated joint ventures.
39
15. Comparative Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
1999
- ----------------------------------------------------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH FULL
QUARTER QUARTER QUARTER QUARTER YEAR
- ----------------------------------------------------------------------------------------------------------------------
(in thousands, except per share figures)
<S> <C> <C> <C> <C> <C>
Total revenue $ 75,477 $ 84,316 $ 91,049 $ 98,108 $348,950
Operating income (loss) $(16,203) $ 15,453 $ 36,228 $ 42,426 $ 77,904
Income (loss) before cumulative
effect of accounting principle $ (9,755) $ 9,847 $ 26,404 $ 25,909 $ 52,405
Net income (loss) $(46,362) $ 9,847 $ 26,404 $ 25,909 $ 15,798
Earnings (loss) per share before
cumulative effect of change in
accounting principle:
Basic $ (0.27) $ 0.27 $ 0.74 $ 0.73 $ 1.46
Diluted $ (0.27) $ 0.27 $ 0.70 $ 0.70 $ 1.41
Earnings (loss) per share:
Basic $ (1.29) $ 0.27 $ 0.74 $ 0.73 $ 0.44
Diluted $ (1.29) $ 0.27 $ 0.70 $ 0.70 $ 0.43
</TABLE>
<TABLE>
<CAPTION>
1998
- ----------------------------------------------------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH FULL
QUARTER QUARTER QUARTER QUARTER YEAR
- ----------------------------------------------------------------------------------------------------------------------
(in thousands, except per share figures)
<S> <C> <C> <C> <C> <C>
Total revenue $ 55,273 $ 59,993 $ 66,998 $ 67,723 $249,987
Operating income (loss) $ 17,812 $ 18,044 $ 21,496 $ (8,700) $ 48,652
Net income (loss) $ 10,953 $ 11,386 $ 13,646 $ (5,462) $ 30,523
Earnings (loss) per share:
Basic $ 0.29 $ 0.31 $ 0.38 $ (0.15) $ 0.84
Diluted $ 0.28 $ 0.30 $ 0.36 $ (0.15) $ 0.81
</TABLE>
40
<PAGE>
58
Independent Auditors' Report
- ----------------------------
To the Board of Directors and Shareholders of Eaton Vance Corp.:
We have audited the accompanying consolidated balance sheets of Eaton Vance
Corp. and its subsidiaries as of October 31, 1999 and 1998, and the related
consolidated statements of income, shareholders' equity and comprehensive
income, and cash flows for each of the three years in the period ended October
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Eaton Vance Corp. and its
subsidiaries as of October 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
October 31, 1999 in conformity with generally accepted accounting principles.
As discussed in Note 2 to the Financial Statements, the Financial Accounting
Standards Board staff addressed the accounting for offering costs incurred in
connection with the distribution of closed-end funds in 1998. As a result, in
1999 and 1998 the Company changed its method of accounting for such costs.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 30, 1999
41
<PAGE>
59
Eaton Vance Corp.
- -----------------
Directors Officers
JOHN G.L. CABOT JAMES B. HAWKES
Chairman, President,
JAMES B. HAWKES and Chief Executive Officer
JOHN M. NELSON ALAN R. DYNNER
Vice President
VINCENT M. O'REILLY and Chief Legal Officer
BENJAMIN A. ROWLAND, JR. THOMAS OTIS
Vice President and Secretary
RALPH Z. SORENSON
BENJAMIN A. ROWLAND, JR.
Vice President
and Chief Administrative Officer
LAURIE G. RUSSELL
Vice President
and Chief Accounting Officer
WILLIAM M. STEUL
Vice President
and Chief Financial Officer
PETER D. STOKINGER
Vice President
and Internal Auditor
42
<PAGE>
60
Investor Information
- --------------------
Eaton Vance Corp. has filed an Annual Report on Form 10-K with the Securities
and Exchange Commission for the 1999 fiscal year. For a copy of that Report,
which is available free of charge to shareholders of Eaton Vance Corp. upon
request, or other information regarding the Company, please contact:
William M. Steul,
Chief Financial Officer
Eaton Vance Corp.
The Eaton Vance Building
255 State Street
Boston, MA 02109
(617) 482-8260
Transfer Agent and Registrar
EquiServe, L.P. is the Transfer Agent and Registrar for the Company's common
stock and maintains shareholder accounting records. The Transfer Agent should be
contacted on questions of change in address, name or ownership, lost
certificates and consolidation of accounts. When corresponding with the Transfer
Agent, shareholders should state the exact name(s) in which the stock is
registered and the certificate number, as well as pertinent account information.
Please contact:
EquiServe, L.P.
Shareholder Correspondence,
Post Office Box 8040
Boston, MA 02266-8040
(781) 575-3400
(800) 733-5001
www.equiserve.com
Auditors
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
(617) 437-2000
Design: Robert Farrell Associates, Inc. Design: Robert Farrell Associates, Inc.
<PAGE>
61
EATON VANCE CORP.
The Eaton Vance Building
255 State Street
Boston, MA 02109
www.eatonvance.com 0441-AR-00
<PAGE>
62
EXHIBIT 21.1
LIST OF SUBSIDIARIES
AS OF OCTOBER 31, 1999*
NAME UNDER
STATE OR WHICH
JURISDICTION OF SUBSIDIARY
INCORPORATION OR DOES
ORGANIZATION BUSINESS
FIRST TIER SUBSIDIARY OF EATON VANCE CORP.:
Eaton Vance Management Massachusetts Same
CERTAIN SUBSIDIARIES OF EATON VANCE MANAGEMENT:
Eaton Vance Distributors, Inc. Massachusetts Same
Boston Management and Research Massachusetts Same
* The names of certain subsidiaries have been omitted in this list
inasmuch as the unnamed subsidiaries, considered in the aggregate as a
single subsidiary, would not constitute a significant subsidiary as of
the Company's fiscal year ended October 31, 1999.
<PAGE>
63
Exhibit 23.1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Eaton Vance Corp.:
We consent to the incorporation by reference in the Registration Statements
listed at Exhibit 99.2 of Eaton Vance Corp. (the "Company") on Forms S-8 and S-3
of our reports dated November 30, 1999 (which reports express an unqualified
opinion and include an explanatory paragraph relating to changes in the method
of accounting for offering costs incurred in connection with the distribution of
closed-end funds) appearing in and incorporated by reference in the Annual
Report on Form 10-K of the Company for the year ended October 31, 1999.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
January 25, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000350797
<NAME> EATON VANCE CORP.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> OCT-31-1999
<CASH> 77395
<SECURITIES> 0
<RECEIVABLES> 9101
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 90488
<PP&E> 12459
<DEPRECIATION> 3425
<TOTAL-ASSETS> 358229
<CURRENT-LIABILITIES> 48890
<BONDS> 0
<COMMON> 551
0
0
<OTHER-SE> 194717
<TOTAL-LIABILITY-AND-EQUITY> 358229
<SALES> 0
<TOTAL-REVENUES> 348950
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 271046
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2960
<INCOME-PRETAX> 85910
<INCOME-TAX> 33505
<INCOME-CONTINUING> 52405
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (36607)
<NET-INCOME> 15798
<EPS-BASIC> 0.44
<EPS-DILUTED> 0.43
</TABLE>
<PAGE>
64
Exhibit 99.2
Eaton Vance Corp.
Open Registration Statements
Registration Statement Filing Date Filing Number
---------------------- ----------- -------------
Form S-8 October 29, 1999 333-89921
Form S-8 August 13, 1999 333-85137
Form S-8 August 26, 1998 333-62259
Form S-8 September 3, 1998 333-62801
Form S-8 September 9, 1998 333-63077
Form S-8 December 19, 1997 333-42813
Form S-3 June 28, 1995 33-60649
Form S-8 June 27, 1995 33-60617
Form S-8 December 1, 1994 33-56701
Form S-8 June 8, 1994 33-54035
Form S-8 March 8, 1994 33-52559
Form S-8 April 23, 1992 33-47405
Form S-8 April 23, 1992 33-47403
Form S-8 April 23, 1992 33-47402
Form S-8 April 23, 1992 33-47401
Form S-3 February 13, 1992 33-45685
Form S-8 September 16, 1991 33-42667
Form S-8 October 11, 1989 33-31382
Form S-8 April 10, 1987 33-13217
